Fed Strategy in Balance: Interest Rate Cut Remains Uncertain

Two senior representatives of the Federal Reserve recently expressed optimism about the U.S. economic development. Inflation seems to be approaching the central bank's long-term target of 2 percent, while the labor market appears robust, according to both central bankers. However, it remains uncertain whether the Fed will actually implement another rate cut at its upcoming meeting. Adriana Kugler, a Federal Reserve Governor, emphasized in a speech at the Detroit Economic Club that the U.S. economy is well-positioned after significant progress in achieving the Fed's goals. Both employment and price stability have developed positively. Nevertheless, she left unanswered whether she would support another rate adjustment at the meeting on December 17-18. Mary Daly, President of the San Francisco Fed, expressed a similar view in an interview. Although a rate cut in December is still on the table, there is no guaranteed direction. Daly stressed the need to continuously calibrate the monetary policy strategy and indicated that an extensive discussion on this would take place at the next meeting. Both Kugler and Daly stated that they would closely examine the jobs report for November, expected on Friday, to make informed decisions. Inflation data would also continue to play a central role. Meanwhile, Fed Chairman Jerome Powell made it clear that his upcoming public remarks would contain few specific policy guidelines, as political developments, such as economic policies announced by Donald Trump, could have a lasting impact on the environment. Kugler pointed out that recent economic growth has also been favored by increased immigration, accompanied by rising productivity. This development has also contributed to price stability. However, the announced tightening of immigration policy by the future administration could burden industries and bring new challenges for wage and price dynamics.