After initiating a significant 50 basis point rate cut last month to start a easing cycle, two female Fed officials both expressed support for the Fed to continue cutting rates in their latest statements, while labeling future actions as balanced, cautious, and data-driven, believing that the dual mandate of achieving inflation and employment should be maintained.

Adriana Kugler, a permanent voting member of the FOMC who is a Fed board director, believes that the Fed should continue to prioritize lowering inflation, but in a “balanced way”, and find a balance between full employment as part of the Fed's mission, avoiding “unnecessary” slowdowns in employment and the economy. If inflation changes as she expects, she will support further rate cuts.

Susan Collins, President of the Federal Reserve Bank of Boston, who will have FOMC voting rights in 2025, stated that with inflation trending soft, the Fed is likely to further cut rates, needing to maintain the current favorable economic environment. Fed policymakers should carefully and data-drivenly reduce rates to help sustain the strength of the U.S. economy.

Kugler: Avoid unnecessary slowdowns in the economy and employment, focusing on inflation risks from hurricanes and events in the Middle East.

During a European Central Bank monetary policy meeting held in Frankfurt, Germany on Tuesday, October 8th, Kugler said:

“I believe the focus should remain on continuing to bring inflation down to 2%, but I also support shifting attention to the full employment aspect of the FOMC dual mandate.”

Kugler reiterated her “strong support” for the Fed's decision to cut rates by 50 basis points in September, noting signs of a cooling labor market in the U.S, “We do not want a significant slowdown in the labor market”, “we do not want the labor market to weaken to a point of causing excessive pain”. She also pointed out that the September U.S. non-farm payroll report released last Friday showed encouraging progress, indicating resilience in the labor market.

"The labor market continues to show resilience, and I support adopting a balanced approach to the dual mandate of the FOMC, so that we can continue to make progress on inflation while avoiding unnecessary slowdowns in employment growth and economic expansion."

The dot plot and economic outlook released after the September Fed meeting show that the median forecast of Fed policymakers is for a total of 50 basis points rate cut this year, with 25 basis points cuts in both the November and December meetings. Kugler said, "If inflation continues to progress as I expect," she would support further rate cuts, but she also pointed out some risks.

"I am closely monitoring the impact of Hurricane Helene and geopolitical events in the Middle East on the economy, as these may affect the economic outlook in the USA. If the downside risks to employment intensify, it may be appropriate to quickly shift policy to a neutral stance."

Kugler said that if the progress of inflation significantly stalls downward, it may be necessary to slow down the pace of rate cuts. It is currently unclear at what level the neutral interest rate may be, with the Fed's current policy rate being "far above it (the neutral level)."

Collins: To maintain the current favorable economic environment, more confidence in inflation is necessary, while the risk of economic slowdown increases.

Also on Tuesday, Collins stated at a community bankers' meeting hosted by the Boston Fed that recent data, including last week's unexpectedly strong September nonfarm payrolls report, indicates that the overall condition of the U.S. labor market is "good overall - neither too hot nor too cold." She now has more confidence that while the labor market remains healthy, inflation will "promptly" return to the Fed's target level.

"Looking ahead, maintaining the current favorable economic environment will require adjusting the monetary policy stance to avoid unnecessary constraints on demand. A cautious, data-driven approach to policy normalization will be appropriate as we balance the risks on both sides and focus heavily on the dual mission authorized by Congress - price stability and full employment."

Collins mentioned that Fed officials at the September FOMC meeting expected a total of 50 basis points rate cut later this year, she said:

"I want to emphasize that the (US Federal Reserve's monetary) policy does not have a preset path, (the Fed) will still cautiously rely on data and adjust with the development of the economy."

Collins stated that the impact of restrictive monetary policy is becoming evident in interest-rate-sensitive industries. As the labor market cools down and economic growth slows, the US economy is now more vulnerable to shocks.

"I am more confident in the downward trajectory of inflation, but the increased risks of the economic slowdown surpassing the level required for price stability recovery."

Editor/Somer