On Friday, several Federal Reserve officials delivered speeches, believing that although there is increasing evidence that inflation issues are easing, the possibility of further interest rate hikes if necessary cannot be ruled out.
On the same day, Boston Fed Chairman Collins said in an interview, "In order to lower the inflation rate to the 2% target in the appropriate time, patience and determination are needed. I will not rule out the possibility of further tightening policies
The central bank official added, "I understand people's tendency to like good news, and there are indeed some good news in some economic data. I think we need to confirm this, but what the Federal Reserve needs now is to persist in fighting inflation
The October report released on Tuesday showed that the inflation rate in the United States has dropped to 3.2%. Even more encouraging is that in the five months to October, the core year-on-year inflation rate, excluding food and energy, was 2.8%, just one step away from 2%, far lower than the 5.1% year-on-year inflation rate in the first five months of this year.
However, Collins stated that the recent data is somewhat "noisy". We need to take a comprehensive look at this data and see promising news, which is certainly great, but I still pay attention to the complete information we have obtained and evaluate the correct practices in real time
Investors seem ready to announce victory, even if the Federal Reserve does not do so. According to data from CME Group, the futures market believes that the probability of the Federal Reserve starting interest rate cuts by May next year is approximately 65%.
Collins pointed out that progress has been made in stabilizing the labor market and tightening the financial environment. It is important for us to be patient and recognize that this is not yet the time to declare victory.
Collins also talked about the recent easing of financial conditions related to the decline in US bond yields, which theoretically means less market constraints on the economy, which may increase the pressure on the Federal Reserve to raise interest rates again.
Deutsche Bank analysts pointed out in a research report on Friday that the financial situation in the United States has "significantly eased" in recent weeks, but they concluded that "although the recent easing may theoretically make the Federal Reserve more hawkish, given recent data showing progress in the labor market and inflation, the Federal Reserve can be less concerned about this situation
Other Federal Reserve officials have also made the same statement, basically that inflation is moving towards the goals set by the Federal Reserve, but there is still a way to go. Policymakers do not want to repeat the same mistakes. In the past, the Federal Reserve prematurely abandoned efforts to reduce inflation, ultimately paying the price.
Chicago Fed Chairman Gullsby stated on Friday that inflation is our focus, and although the data has improved, it is still too high. We will do everything possible to defeat inflation.
San Francisco Fed Chairman Daley also stated that it is uncertain whether inflation can reach the 2% target, and it is too early to announce a victory over inflation. The central bank's policy debate is now focused on what constitutes sufficient restrictions and how long this stance will be maintained.