Federal Reserve officials are cautious about interest rate cuts and continue to monitor inflation and employment data

According to the Zhitong Finance APP, Chicago Federal Reserve President Austan Goolsbee stated on Wednesday that he is skeptical about the assumption that tariffs will drive inflation, and he is not fully convinced whether the U.S. labor market has deteriorated. Some of his Federal Reserve colleagues have used this as a reason to support interest rate cuts, but Goolsbee indicated that he does not rule out the possibility of aligning with them at the policy meeting on September 16-17.

Goolsbee pointed out at a press conference following a speech, "Every meeting this fall will be a real-time meeting, and decisions will be based on the latest data." He added, "I am not saying that I cannot make decisions at the upcoming meetings because we will receive some important information that will supplement the data from the past three months."

He stated that if inflation significantly declines and the labor market cools, "the Federal Reserve typically takes counter-cyclical actions" to respond to economic slowdowns.

At the meeting on July 29-30, the Federal Reserve maintained the short-term borrowing rate in the range of 4.25%-4.50%, with Vice Chair Lael Brainard and Governor Christopher Waller voting against it, advocating for rate cuts to address potential labor market weakness. Goolsbee believes that the current economic signals are more complex.

He noted that although the recently revised monthly job creation data shows an average increase of only 35,000 jobs over the past three months, this may reflect a decline in immigration rather than weak demand. He also mentioned that the 4.2% unemployment rate and low layoff rates indicate that the labor market remains robust.

Regarding the timing of interest rate cuts, Goolsbee stated that confidence in taking action requires seeing several months of stable declining inflation data. He explained, "We will continue to gather information and proceed along the established path; if inflation indeed approaches the 2% target, we may return to the r_ level more quickly," where r_ is the level that economists use to measure the interest rate that should be achieved when the economy is neither overheating nor cooling.

Meanwhile, Atlanta Federal Reserve President Raphael Bostic also stated that the U.S. labor market is close to full employment, providing the Federal Reserve with "room" to act without rushing to adjust policy. He pointed out at an event in Alabama, "Policy fluctuations can be confusing to the public, and I prefer to wait for clearer signals before taking action."

However, he also warned that the July employment report showed job creation far below expectations and that the data for the previous two months had been historically revised downwards. If the labor market is weaker than expected, it could shift the balance of policy discussions. Bostic stated, "In the next five weeks, our task is to better understand the employment market situation in preparation for the September policy meeting."

Regarding the impact of tariffs on inflation and Federal Reserve policy, Bostic noted that theoretically, tariffs should only lead to a one-time price increase, and the Federal Reserve does not need to intervene. However, the tariffs implemented by the Trump administration are larger in scope and have broader objectives of adjusting global supply chains, which may make the economy different from the past. He emphasized, "If these measures are successful, then the inflation trend after tariffs should not be the same as before tariffs; the economy has indeed changed."