"The Time for Policy Adjustment Has Come"… Strengthening US Interest Rate Cut Outlook

Pigeon Faction Daily Governor "Interest Rates Pressure Economy"
Hawkish Governor Barkin "Concerns Over Inflation Reacceleration Decrease"

Senior officials of the U.S. Federal Reserve (Fed) are supporting a rate cut in September.

Mary Daly, President of the Federal Reserve Bank of San Francisco, said in an interview with Bloomberg TV on the 26th (local time), "It is time to adjust policy."

Mary Daly, President of the San Francisco Fed
[Photo by Reuters]

This aligns with Fed Chair Jerome Powell's speech at the Jackson Hole Economic Policy Symposium on the 23rd.

President Daly said, "The direction of change is downward," adding, "I think now is the time to adjust (interest rates)." She further explained, "I do not want to be in a situation where policy is kept very restrictive during an economic recession."

She did not specify the exact size of the rate cut in September. The most likely path for rate cuts, she said, is one where inflation gradually slows while the labor market remains stable and adds jobs at a sustainable level. She added, "If this forecast materializes, it seems reasonable to adjust policy at a regular and normal pace."

She also mentioned that interest rates are increasingly putting pressure on the economy, saying, "This is a factor that harms the labor market and growth." Regarding the labor market, she said, "I have not yet seen the labor market deteriorate," and added, "If it worsens or shows signs of doing so, it would be appropriate to act aggressively."

President Daly is considered a dovish figure (favoring monetary easing) within the Fed. Thomas Barkin, President of the Federal Reserve Bank of Richmond, who is a hawkish figure (favoring monetary tightening), also made remarks supporting a rate cut in September on the same day.

Thomas Barkin Richmond Yeon President [Image source=Reuters Yonhap News]

President Barkin said on a Bloomberg podcast that companies are currently adopting low employment and low layoffs methods, but he does not think they will continue to maintain these methods.

President Barkin also did not mention the specific size of the rate cut next month. He stated, "We are taking a 'test-and-learn' approach to rate cuts." Major foreign media interpreted this as indicating a baby step of a 0.25 percentage point cut rather than a big step of a 0.5 percentage point cut in September.

According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on that day fully priced in a more than 0.25 percentage point rate cut by the Fed in September. The probability of a 0.25 percentage point cut is 69.5%, while the probability of a 0.5 percentage point cut is 30.5%.

Regarding inflation, President Barkin said, "We have seen low figures over the past four months, which are reflected across the components of the price index," and assessed, "Concerns about inflation reacceleration have certainly diminished."

Both President Daly and President Barkin have voting rights at this year's Federal Open Market Committee (FOMC) meetings.

This content was produced with the assistance of AI translation services.