Fed Officials Weigh Next Move as Inflation Eases but Risks Remain
Two senior Federal Reserve policymakers have urged caution as markets grow increasingly confident that another rate cut could arrive before year-end.
San Francisco Fed President Mary Daly and Chicago Fed President Austan Goolsbee each delivered nuanced messages this week, reflecting the central bank’s effort to balance easing inflation with the need to preserve economic stability.
Balancing Inflation and Jobs
Mary Daly described the economy as being at a “delicate stage,” arguing that progress on inflation shouldn’t come at the expense of employment. While acknowledging that prices are moving in the right direction, she stressed that they remain above the Fed’s target, meaning the fight is far from over.
Daly defended the Fed’s earlier 50-basis-point cut, saying it provided a better position to guide the economy through the final stretch of the year. She also hinted that another move could be on the table at the December policy meeting, depending on how economic data evolves. However, Daly dismissed talk of internal conflict within the central bank, saying policymakers are aligned on the need for measured, data-informed decisions.
A Measured Approach to Future Cuts
Austan Goolsbee struck a similarly careful tone but from a slightly different angle. He described the U.S. economy as “fundamentally solid,” even as certain sectors show fatigue. While he agreed that inflation has cooled significantly, he cautioned against assuming victory too soon, warning that cutting rates prematurely could reignite price pressures.
For Goolsbee, the key lies in gradual easing rather than aggressive cuts. He argued that lowering rates in line with inflation’s decline is the most responsible strategy, but emphasized that timing will be critical. “The wrong move at the wrong time,” he suggested, “could undo much of the progress made since the tightening cycle began.”
Labor Market Under the Microscope
On the employment front, Goolsbee highlighted a puzzling dynamic: low hiring combined with low layoffs — a rare balance that suggests companies are holding on to workers but slowing expansion. He called it “an unusual but not unhealthy sign,” suggesting that the labor market remains resilient even as growth cools.
Both officials agreed that the inflation challenge still outweighs labor concerns, reinforcing that the central bank’s focus remains squarely on price stability. While markets continue to speculate about a December rate cut, Daly and Goolsbee’s remarks signal that the Fed is in no rush to make bold moves until it’s confident inflation is truly subdued.
The message from both: the next step will be cautious, deliberate, and rooted in evidence — not expectation.
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