On Saturday (November 22) local time, Boston Federal Reserve President Susan Collins stated that she believes the Fed does not need to cut interest rates further in December. This statement further highlights the disagreement among policymakers regarding future monetary policy actions.
As one of the voting members of the Federal Reserve's policy committee this year, Collins said in an interview on the sidelines of an economic conference on Saturday that the Fed has implemented two 25-basis-point rate cuts since August, shifting the monetary policy stance slightly toward curbing inflation.
At its October meeting, the Federal Open Market Committee (FOMC) voted 10-2 to cut interest rates by 25 basis points, lowering the target range for the federal funds rate to 3.75%-4.00%.
Collins points out that given that inflation continues to rise above the Fed’s 2% target, such a policy stance may still be appropriate, especially given the strong performance of financial markets that supports economic resilience.
“Overall financial conditions are currently more of a tailwind than a headwind,” Collins said. “In my view, this environment does not imply an urgent need for more accommodative monetary policy.”
Collins said she has not yet decided how she will vote in December, nor has she decided whether she will vote against a resolution she disagrees with.
Since the interest rate meeting at the end of October, Collins has repeatedly called for caution regarding further rate cuts. Earlier this month, she stated that the conditions for further rate cuts were "relatively high."
Collins also stated that the September jobs report was mixed and did not substantially change her view on the labor market.
Data released on Thursday showed that the U.S. added 119,000 jobs in September, a strong performance, but the unemployment rate rose 0.1 percentage point to 4.4%. The report was originally scheduled for release in early October, but was delayed until this week due to the month-and-a-half-long federal government shutdown.
Next month's interest rate meeting may be the most suspenseful in recent years. Prior to the October meeting, the market widely expected the Federal Reserve to cut interest rates by 25 basis points in both October and December. However, at the press conference following the October meeting, Fed Chairman Powell stated that a December rate cut is far from a certainty.
According to the minutes of the October meeting released on Wednesday, policymakers were significantly divided on whether to continue cutting interest rates in December.
Since the beginning of November, traders' bets on the December decision have reflected a high degree of uncertainty. Earlier this week, market bets on a December rate cut by the Federal Reserve fell to less than 40%.
However, when New York Fed President Williams Following his speech on Friday, bets have shifted back to a higher probability of an interest rate cut.
As the third-ranking official at the Federal Reserve, Williams stated that a rate cut "in the near future" might be reasonable, which boosted investors' expectations for a December rate cut.
(Article source: CLS)
