Inflation levels remain above target! Dallas Federal Reserve President warns of cautious interest rate cuts
Dallas Federal Reserve President Logan warned that despite last month's interest rate cut, future policy needs to be cautious due to inflation levels remaining above target and on an upward trend. She emphasized that rate cuts could lead to excessively loose financial conditions, making it more difficult to restore price stability. Meanwhile, the U.S. stock market is volatile, with the S&P 500 Index briefly reaching an all-time high. The government shutdown affects the release of economic data, and the market relies on data from private institutions. Investors almost unanimously expect the Federal Reserve to continue cutting rates this month
According to the Zhitong Finance APP, Dallas Federal Reserve President Lorie Logan stated on Thursday that the Federal Reserve's interest rate cut last month served as a certain "insurance" against the risk of a sharp deterioration in the labor market. However, she also warned that subsequent policies need to be particularly cautious, as inflation levels remain above target and are showing an upward trend.
Speaking to economics students at the McCombs School of Business at the University of Texas at Austin, Logan pointed out, "We need to be very careful with the upcoming interest rate cuts to ensure that the calibration of policy does not lead to an excessively loose financial environment, which would ultimately have to be reversed, making the process of restoring price stability more painful."
Meanwhile, the U.S. stock market experienced volatility during the trading session. The S&P 500 index briefly hit a record high of 6,731.94 points before retreating; the Dow Jones Industrial Average fell more than 120 points or 0.26%; the Nasdaq rose 0.07%. In terms of sectors, technology stocks continued to attract capital, while real estate, utilities, and consumer stocks became major drags. Small-cap stocks and value stocks also performed poorly.
In the macroeconomic environment, the U.S. government shutdown entered its second day, forcing the release of official economic data to be paused. Important indicators such as weekly initial jobless claims and factory orders were not published, leaving the market to rely on data from private institutions like ADP. According to foreign media surveys, economists had originally expected the number of initial jobless claims to rise from 218,000 to 222,000 last week; meanwhile, the Challenger report showed that the number of layoffs by U.S. companies in September decreased by 37% compared to August.
In the bond market, U.S. Treasury yields rebounded from the previous day's decline, with the 10-year Treasury yield at 4.115% and the 2-year yield at 3.568%. Treasury Secretary Janet Yellen stated in an interview that the reopening conditions proposed by the Democrats could exacerbate inflation and emphasized that President Trump would maintain his position in negotiations.
Despite this, investors have almost no doubt about the Federal Reserve continuing to cut rates in October. According to the CME FedWatch Tool, traders are betting on a 100% probability of another rate cut this month, with 99% expecting a 25 basis point cut and 1% expecting a 50 basis point cut. Due to the unexpectedly weak ADP private employment data, the likelihood of maintaining interest rates unchanged has almost completely disappeared
