Fed Officials Assess Interest Rate Cut Possibility

Federal Reserve officials have made significant announcements regarding potential changes in monetary policy and the economic outlook. Boston Fed President Susan Collins indicated that interest rates could be lowered again in December, while Chicago Fed President Austan Goolsbee expressed expectations for a total reduction of 125 basis points by the end of 2025. Richmond Fed President Thomas Barkin forecasted that core inflation will decline in early 2024.

Susan Collins stated that she is not completely ruling out the possibility of lowering interest rates at the policy meeting scheduled for December. She expressed the desire to see more data before the U.S. central bank makes its decision, saying:

"I certainly wouldn't take December off the table. However, we will look carefully at the data in the coming period and see what makes sense when we get to the next Federal Open Market Committee meeting."

Collins mentioned that uncertainties regarding the economic outlook persist and limit the guidance on monetary policy direction. She stated that they are well-positioned regarding monetary policy but noted that due to the unpredictability of the short-term economic outlook, it is not a suitable time for clear forward guidance. She reiterated that the decisions made at the December policy meeting would be data-driven.

Goolsbee's expectation for interest rate cuts by the end of 2025 Chicago Fed President Austan Goolsbee expects a total reduction of 125 basis points by the end of 2025. Referring to the projections made by Fed policymakers in September, Goolsbee expressed his expectation that the central bank would lower the policy rate by a quarter-point this year and by a full point next year. The projections announced in September illustrated the Fed's interest rate predictions on a graph.

Goolsbee stated that according to the median view of these projections, the Fed's policy rate will end the year at 4.4% and will be at 3.4% by the end of next year. This assessment could mean a new framework for rate policy if expectations for the U.S. economy's recovery process become clearer.

Barkin: "Core inflation is expected to decline" Richmond Fed President Thomas Barkin anticipates that inflation will decrease in early 2024. He expects inflation to remain stable throughout the year but start to decline in the first quarter. Referring to the Fed's preferred core personal consumption expenditures price index, Barkin noted that this index has remained above 2.5% in recent months.

Barkin indicated that feedback from his contacts in the business world revealed a lack of pricing power and that the type of inflation seen in the past has not occurred. These observations are considered promising regarding the possibility of lower inflation figures following the first quarter. Barkin's statements underscore an optimistic perspective on achieving progress in line with the Fed's inflation targets.