Financial magazine news on October 1st (Editor: Niu Zhanlin) Local time on Monday, Chicago Federal Reserve Chairman Gulspie said that considering the current economic situation and its possible direction, he believes the Federal Reserve has reasons to significantly cut interest rates.

During the media interview that day, Gulspie pointed out that this round of interest rate cuts will last for a year or more, and the Federal Reserve is trying to lower interest rates to normal levels. As for the speed and extent of the rate cuts, he stated that the Federal Reserve must significantly reduce the benchmark interest rate within the next 12 months, and there will be many rate cuts, with the magnitude not stopping at 25 basis points.

Driven by weakening inflation pressures and rising risks in the job market, the Federal Reserve is expected to steadily cut interest rates. Gulspie pointed out that the economy has largely returned to normal. That is, macroeconomic indicators such as economic activity, employment, and inflation have reached a relatively stable and predictable level. Compared with the previous unstable or abnormal conditions, the current situation is closer to long-term average levels or expected economic performance.

Data released last week shows that the Federal Reserve's most favored PCE inflation index showed a cooling of price pressures last month, rising 2.2% year-on-year in August, lower than expected. The closely watched core PCE index rose 2.7% year-on-year in August, in line with expectations. These data indicate that the inflation rate continues to move towards the Federal Reserve's 2% target.

Federal Reserve officials reduced interest rates by 50 basis points in September, reducing the benchmark rate to between 4.75% and 5%, citing improved inflation and a cooling labor market.

Gulspie mentioned seeing some warning signs in the job market, while also adding that the current unemployment rate (4.2%) seems to be at a sustainable level.

In addition, Gulspie also mentioned the issue of port strikes, expressing concern that the strike of dock workers may continue, leading to serious supply chain disruptions. Port strikes along the US East Coast and the Gulf of Mexico will begin on Tuesday, which could be the most destructive strike for the US economy in decades.

Goolsbee said: "Any negative supply shock, in our words, will increase operating costs and lead to shortages, which is something we must deal with, and its impact has never been good."

As negotiations with marine transportation companies and port terminal operators' representative organizations reached a deadlock, dockworkers at ports along the East Coast and Gulf of Mexico have less than 24 hours before they go on strike.

These ports handle half of the total trade volume in the United States. This could disrupt the flow of commodities, affect commodity prices and the broader economy, causing supply chain disruptions similar to those during the pandemic.

White House spokesperson Patterson said that the Biden administration is eager to avoid a strike and has been in contact with both sides over the weekend, urging them to reach an agreement. Her statement seems to indicate pressure on the United States Maritime Alliance, representing employers at ports along the East Coast and the Gulf of Mexico, to move in the direction of union demands.

Editor/ping