On Wednesday, December 20th local time, Philadelphia Federal Reserve Chairman Huck stated that it is important for the Federal Reserve to begin cutting interest rates, but this process should not be immediately initiated as the work of quelling inflation is not yet completed.
In order to curb high inflation, the Federal Reserve has been aggressively raising interest rates since last spring, raising the federal funds rate from near zero levels to the 5.25% -5.5% range.
At the last interest rate meeting of this year, the Federal Reserve kept interest rates unchanged for three consecutive times, with the last rate hike in July of this year. The forecast released after the interest rate meeting shows that Federal Reserve officials expect to cut interest rates three times by 25 basis points next year.
Huck is one of the 12 members of the Federal Open Market Committee (FOMC) who have voting rights on monetary policy this year, but he will no longer be a member of the committee next year.
Huck said in a media interview on Wednesday that he believes the Federal Reserve does not need to raise interest rates again, but he also emphasized his tendency to maintain high interest rates for a period of time to ensure inflation falls back to the target level of 2%.
The inflation level in the United States has significantly fallen from the peak of 9.1% set in June last year, with an overall inflation level of 3.1% in November. The inflation indicator listed here is the Consumer Price Index (CPI).
Since last week's interest rate meeting, the US stock market has risen significantly, with the Dow Jones Industrial Average hitting a new historical high for five consecutive trading days and the S&P 500 index approaching historical highs. The prospect of Fed rate cuts has significantly boosted investor sentiment, with Wall Street currently betting that the Fed will cut rates as early as March next year.
However, the frenzy in the market seems to have made decision-makers uneasy, and since last Friday, Federal Reserve officials have been trying to convey the message to the market that interest rate cuts will not be as expected.
Like his colleagues, Huck also suppressed market expectations for interest rate cuts on Wednesday. He said that it is important to initiate interest rate cuts, but there is no need to do so too quickly, and there will be no immediate start to interest rate cuts.
Although Federal Reserve officials have recently stated that they will not cut interest rates soon, most have not specified a specific timetable for the rate cut. However, Atlanta Fed Chairman Bostic has given a relatively specific forecast, predicting that the Fed will cut interest rates twice in the second half of next year.
Bostic said on Tuesday that the timing of interest rate cuts is important, as the federal funds rate needs to be low enough before inflation returns to target levels in order for the economy to land smoothly and not be unnecessarily hit by rising unemployment rates.