The Zhitong Finance App learned that several Federal Reserve officials opened the door to further sharp interest rate cuts on Monday. They pointed out that the current interest rate level is still putting serious pressure on the US economy. However, none of these Federal Reserve officials indicated that they would like to repeat the Fed's practice of cutting interest rates by 50 basis points last week, and that the upcoming data will guide their decisions.

Chicago Federal Reserve Chairman Austin Goolsbee (Austan Goolsbee) said at an event: “We still have a long way to go in the next 12 months to lower interest rates to a neutral level in an attempt to maintain the current state of the economy.” Goulsby said he expects the Federal Reserve's current benchmark interest rate to be “hundreds of basis points” higher than the neutral interest rate.

When it comes to calling for interest rate cuts, Goulsby's voice is tougher than other Federal Reserve officials. He stressed that the US employment situation and inflation are at favorable levels, but this situation will not continue unless the Federal Reserve “drastically” cuts interest rates in the next few months. “If the time limit is too long, you won't stay in the best position for a dual mission for too long,” he said.

Goulsby emphasized his point. He warned that when the job market deteriorates, it will be faster than the central bank can ease it by cutting interest rates. Historically, large-scale layoffs have created a negative feedback cycle in which unemployment led to reduced spending and further led other companies to lay off workers to cope with falling demand.

Goulsby said, “It's unrealistic to sit back and wait for problems to occur. If we want to make it happensoft landing, we must not lag behind the situation.” Regarding the unemployment rate rising from a record low of 3.4% to 4.2% last year, Goulsby said that this is what most people think is a level consistent with full employment.

Goulsby, Atlanta Federal Reserve Chairman Raphael Bostic (Raphael Bostic), and Minneapolis Federal Reserve Chairman Neel Kashkari (Neel Kashkari) all said on Monday that they support the Federal Reserve's decision to cut interest rates by 50 basis points last week.

Bostic is clearly more cautious than Goulsby when it comes to how fast the Federal Reserve should cut interest rates. But he also acknowledged that the Federal Reserve may still have room to cut interest rates before reaching neutral interest rates.

Bostic said at an event organized by the European Economic and Financial Center: “I don't know if anyone would reasonably refute the claim that we are quite a bit higher than it (neutral interest rate).” He also said that the uncertainty of inflation and employment should rule out the possibility of cutting interest rates by more than 50 basis points at a time.

Bostic did not directly say whether he would support another 50 basis point cut in interest rates. He warned not to assume that last week's interest rate cuts would be repeated. But he also said, “If there is further evidence that the job market is substantially weak in the next month or so, it will definitely change my opinion on the strength of policy adjustments.”

For several months, Fed policymakers have been debating where neutral interest rates might be and whether they have risen since the pandemic severely disrupted the US and global economy. Most economists believe that neutral interest rates have risen, although it is uncertain whether this is a temporary or permanent change.

Kashkari, on the other hand, pointed out that despite the high policy interest rate, the US economy is still strong. He said, “The longer this economic resilience continues, the more I think that a temporary increase in the neutral interest rate level may actually be more structural.”

However, Kashkari added that the overall policy position “remains tight,” and he is inclined to cut interest rates by 25 basis points each during the remaining two policy meetings of the year.

It is worth mentioning that Federal Reserve Governor Christopher Waller (Christopher Waller) said on Friday that unexpectedly favorable inflation data in recent weeks prompted him to support interest rate cuts of 50 basis points during last week's policy meetings, and he may support interest rate cuts of 25 basis points during the next two policy meetings. Waller added, “If the job market data worsens, or the inflation data continues to be weaker than everyone's expectations, then you may see an acceleration in the pace of interest rate cuts.” However, he also pointed out that another recovery in inflation may also cause the Federal Reserve to suspend interest rate cuts.

Waller's views are in contrast to Federal Reserve Governor Michelle Bowman (Michelle Bowman). Bauman said on Friday that she voted against the Fed's decision to cut interest rates by 50 basis points during last week's policy meeting — the first time since September 2005 that a Federal Reserve official objected to the interest rate decision because she was still concerned that inflation was higher than the target.