The Federal Reserve report states that labor supply is slowing, and officials have differing opinions on the future direction of interest rates

According to the Zhitong Finance APP, on Friday, the Federal Reserve stated in its semi-annual monetary policy report submitted to Congress in June that the number of immigrants has significantly decreased since mid-2024, leading to a slowdown in labor supply growth, which helps maintain balance in the labor market as employment growth gradually cools. The report noted: "The growth of labor supply is not as strong as in previous years, mainly due to a significant reduction in immigration, coupled with a decline in labor participation rate."

Nevertheless, the Federal Reserve still described the current U.S. job market as "remaining robust," with job growth maintaining a "moderate" pace and the unemployment rate at a low level. As labor demand has gradually cooled over the past few years, multiple indicators show that the labor market has returned to a balanced state, with tensions easing compared to pre-pandemic levels. The unemployment rates across different age, education, gender, and ethnic groups remain low, and the improvement in the labor market is also widely distributed.

The Federal Reserve reiterated in the report the recent views of Chairman Jerome Powell and other officials that the current monetary policy remains flexible, and interest rates can remain unchanged while waiting for a clearer economic outlook before making decisions. On Wednesday, the Federal Reserve maintained the benchmark interest rate in the range of 4.25% to 4.5% for the fourth consecutive time, with officials hoping to further observe the specific impact of the latest tariff policies from the Trump administration on the economy.

Several Federal Reserve officials expressed their views on interest rates on Friday, and there were differing opinions on the future direction of interest rates. San Francisco Fed President Mary Daly indicated that she prefers to wait until "this fall" for a rate cut. "By then, we will have more data," Daly said in an interview on Friday, "Businesses have also told me that they expect to see some decision-making turning points by the fall." Although she described the lower-than-expected inflation data over the past three months as a "significant positive," she emphasized that "we should not rush," and a balance should be sought between controlling inflation and promoting employment.

In contrast, Federal Reserve Governor Christopher Waller took a more aggressive stance, suggesting that a rate cut could happen as early as July. He stated, "We could start cutting rates as early as July." Waller pointed out that current U.S. GDP and inflation data are close to the Federal Reserve's targets, while the policy rate remains 1.25 to 1.5 percentage points above neutral levels, providing room for rate cuts. He mentioned that if unexpected shocks, such as a Middle East crisis, occur in the future, the Federal Reserve could pause the rate-cutting process, but under the premise of moderate inflation, "we have been on hold for six months, and now that the data is performing well, it is time to take the next step."

However, not all officials support a rate cut in the short term. Richmond Fed President Thomas Barkin stated that there is currently no urgent reason to cut rates, especially considering that a new round of tariffs could push prices higher, while the job market and consumer spending remain resilient. In an interview with foreign media, he said: "I don't think the current data compels us to act quickly. I am very alert to the fact that inflation has not met the target for four years."

Barkin pointed out that the unemployment rate remains low at 4.2%, and businesses have not shown signs of large-scale layoffs, while consumer spending is performing "stably," neither too hot nor too weak. He stated: "There is currently no data in any direction that forces us to take immediate action. Core inflation is still above the target, and in this case, maintaining moderate tightening is reasonable." Despite the median dot plot released at the June meeting indicating that officials expect two rate cuts this year, a total of seven policymakers anticipate that there will be no rate cuts this year, reflecting a significant divergence of views within the Federal Reserve.

In addition, Bakin emphasized the uncertainty brought about by the new round of tariffs. He pointed out that currently, businesses are generally "holding back" on whether to make capital investments or adjust their workforce, creating a balance of "low hiring - low layoffs." The Trump administration has set July 9 as the deadline for countries to reach a trade agreement with the U.S.; if negotiations fail, the U.S. will impose higher tariffs on certain imported goods. This could have potential impacts on consumer prices, business confidence, and supply chain stability, which are fundamental factors that make it difficult for the Federal Reserve to assess the consequences of its policies