Source: Wall Street See

On Wednesday, Lorie Logan, President of the Federal Reserve Bank of Dallas, stated that as the Fed's policy normalizes from its highest level in over 20 years, she supports a gradual rate cut.

Logan stated that she continues to focus on the inflation and employment aspects of the Fed's dual mandate, and believes that there are still risks in the current US economy, proving that a more cautious policy approach is reasonable.

Tomorrow evening, the US CPI data for September will be released, which will be an important data affecting rate cut expectations and the trend of US stocks. Currently, it is widely expected by the media that the overall CPI for September will increase by 0.1% on a month-on-month basis, and the core CPI is expected to increase by 0.2% month-on-month.

Economic outlook is uncertain, and there are still divergences in the magnitude of rate cuts.

Although she does not have monetary policy voting rights this year, Logan expressed support for the decision to lower borrowing costs at the central bank's September meeting. In September, the Federal Open Market Committee made the first rate cut since the outbreak of the pandemic, with a larger-than-expected 50 basis point cut.

"Following last month's half-point cut in the federal funds rate, from now on, adopting a more gradual approach to returning to a normal policy stance may be appropriate to best balance the risks to our dual mandate goals."

Currently, there are diverging views on the magnitude of future rate cuts. More than half of the Fed officials believe that there should be a further 50 basis point cut this year, which means the Fed will cut rates by 25 basis points at the remaining two meetings. Seven officials support only one rate cut, that is 25 basis points, and two officials expect no further rate cuts.

Logan agrees with the easing of inflation and states that deflation is a common phenomenon. Despite a slight cooling in the labor market, it remains healthy. She adds that monetary policy still remains restrictive and is likely to continue to drag on the demand for housing and other services.

"Inflation and the labor market are just a step away from our target. Easing policies will help prevent an excessive cooling of the labor market, thereby bringing the inflation rate back to the target level in a sustainable and timely manner."

However, she points out that there are various uncertainties in the outlook, and there are still some upside risks to inflation, so it is necessary to lower interest rates at a more cautious pace.

"I still believe that the inflation rate may stay above our target of 2%, which is a significant risk."

Editor / jayden