Several senior officials of the Federal Reserve have spoken out, expecting interest rates to gently decline before the end of the year, and inflation is expected to decrease again this year

On Friday, several senior officials from the Federal Reserve spoke, all of whom expect inflation to continue to fall towards the Fed's 2% target, and future interest rates are still expected to decline. They also affirmed that the U.S. labor market remains strong following the release of the non-farm payroll report. Meanwhile, they pointed out that Trump's policies have brought considerable uncertainty.

Minneapolis Fed President Kashkari expects policymakers to be able to "moderately" lower interest rates before the end of this year. This year's voting member, Chicago Fed President Goolsbee, stated that the Fed may hold steady for the time being, but he still anticipates that interest rates will decline in the next 12 to 18 months, with the equilibrium level of the federal funds rate significantly lower than the current level. Fed Governor Kugler indicated that a stable job market gives the Fed time to make decisions patiently.

Minneapolis Fed President: Expects Moderate Rate Cuts Before Year-End

U.S. Minneapolis Fed President Kashkari expects inflation to continue to fall towards the Fed's 2% target, allowing policymakers to "moderately" lower interest rates before the end of this year:

We are currently in a very favorable position to keep rates unchanged until we have more information on tariffs, immigration, and taxes. I expect the federal funds rate to decline slightly by the end of this year.

Kashkari's remarks echo those of other Fed policymakers recently. He pointed out the significant uncertainty regarding how and when the new policies of the Trump administration—such as immigration restrictions, tariff measures, and tax cuts—will affect the economy and inflation.

Kashkari's comments came shortly after the release of the U.S. January non-farm payroll report. The report showed that job growth in January was below expectations, but the December non-farm payroll data was revised upward, and the unemployment rate fell to 4%, the lowest level since May of last year. Average hourly earnings in January rose by 0.5% month-on-month, the largest monthly increase since August of last year.

Kashkari commented that the labor market remains strong, although not as hot as it was a year or two ago. The economy is performing well, and business confidence remains optimistic.

Kashkari reiterated that the resilience of the economy in a high-interest-rate environment suggests that the neutral interest rate, which neither suppresses nor stimulates economic growth, may be higher than previously thought. There is considerable uncertainty regarding the level of the neutral interest rate.

Kashkari believes that the rise in the 10-year U.S. Treasury yield is not concerning. He is not worried about the divergence between the 10-year U.S. Treasury yield (which has risen about 90 basis points over the past five months) and the Fed's benchmark rate (which has declined by 1 percentage point during the same period).

Chicago Fed President: Expects Rate Declines in the Next 12 to 18 Months

This year's voting member, Chicago Fed President Goolsbee, stated that the Fed may hold steady for the time being, but he still expects interest rates to decline in the next 12 to 18 months:

We may hold steady for the time being, but if we can navigate the uncertainties of policy, geopolitics, and the commodity markets, I believe that in the long run, the equilibrium level of the federal funds rate will be significantly lower than it is currently. Goolsbee emphasized that due to the uncertainty of the Trump administration's policies—including the impacts of tariffs, immigration policies, and tax cuts—the pace of interest rate declines may be slower.

Goolsbee stated that the non-farm payroll report is robust, and the U.S. is entering a state similar to full employment. This is much better than the situation six months ago when the unemployment rate was slowly rising, and the Federal Reserve was trying to figure out whether it would continue to worsen.

Goolsbee still believes that the U.S. is moving towards the 2% inflation target, which is the Federal Reserve's policy goal. He pointed out that recent inflation data has risen, mainly due to base effects. Inflation data should start to improve later in the first quarter of this year, as the year-on-year comparison base will change. Wage growth is roughly in line with the 2% inflation target.

He added that the future challenge for the Federal Reserve is to determine which parts of inflation are "transitory" and can be ignored, and which parts are "permanent," especially in the context of the continued or expanded implementation of Trump's tariff policies.

Goolsbee stated that he does not believe the Federal Reserve will play a role in Trump's proposed sovereign fund plan.

Federal Reserve Governor Kugler: A stable job market gives the Fed patience

Federal Reserve Governor Kugler stated that U.S. economic activity remains resilient. The U.S. economy is still fundamentally solid, and the GDP growth rate is expected to be robust in the first quarter of 2025.

Regarding the non-farm data released on Friday, he stated that the job market is neither weakening nor overheating. The latest data is consistent with a healthy labor market. The job market has recovered from the impact of the COVID-19 pandemic, and businesses are creating jobs to support the market.

Kugler pointed out that a stable job market gives the Federal Reserve time to make decisions patiently. The U.S. has not yet achieved the 2% inflation target, and it is reasonable for the FOMC to temporarily maintain the policy interest rate unchanged, hoping to ensure continued progress on inflation. He mentioned that the Federal Reserve's framework assessment work needs to include lessons learned from recent inflation issues.

Kugler noted that there is considerable uncertainty regarding the impacts of President Trump's policies.

Kugler believes that artificial intelligence (AI) may provide a more lasting boost to productivity. Productivity has improved recently, and the benefits it brings are significant