Federal Reserve officials staged a Jackson Hole "dovish meeting": ready to start cutting interest rates quickly, taking orderly actions, with the magnitude of rate cuts determined

The global central bank annual meeting opened on Thursday in Jackson Hole, Wyoming, USA, and from the intensive statements on the first day, this annual event has become a policy "preview" for Federal Reserve officials.

On Thursday, August 22, Eastern Time, three Federal Reserve officials each expressed their views on the future interest rate path in interviews with different media outlets. Among them, Susan Collins, the President of the Boston Fed who will have voting rights at the FOMC meetings in 2025, said that the Fed will soon be ready to start cutting rates. In addition to hinting at possibly supporting a rate cut at the next Fed meeting in September, Collins also said that it may be appropriate to cut rates in a "gradual and orderly" manner.

Collins emphasized that she has not seen any "major warning signals" in the economy. She commented that the downward revision of non-farm employment figures announced by the U.S. Department of Labor on Wednesday was within expectations, "the unemployment rate is still low," the labor market remains healthy, and there is a better balance between inflation and employment. Collins said:

"We have seen a significant drop in inflation. In my view, the decline in inflation is consistent with our confidence in the downward trajectory of inflation, and the labor market is overall healthy. I do believe that we can start easing policy very soon."

"I think that once we take a different policy stance, a gradual and orderly pace may be appropriate."

Collins stated that she is focused on "maintaining a healthy labor market while continuing to lower inflation," and based on this background, she believes it is appropriate to start cutting rates soon. Regarding future monetary policy, Collins said that data will tell us what pace is reasonable, with no preset path.

Similarly, Jeffrey Schmid, the President of the Kansas City Fed who will have voting rights at FOMC meetings in 2025, said that he is not yet ready to support a rate cut and mentioned that rate policy should be determined by data.

Schmid said that inflation is moving in the right direction, and the Fed should remain patient. He hopes to see more economic data before supporting any decision to start cutting rates.

"For me, it's meaningful to really focus on some data in the coming weeks. It's important to see more data before we take action - at least before I take action or recommend taking action. I still think that if we are not too cautious in our decision-making, we may see a slight rebound in demand."

The preliminary benchmark revision results released by the U.S. Department of Labor on Thursday showed that the total non-farm employment in the U.S. was revised down by 818,000 in the year ending in March, the largest downward revision since 2009. Schmid commented, "This (818,000) is a big number, but it hasn't really changed the way I think about monetary policy."

Like Collins, Patrick Harker, the President of the Philadelphia Fed who will have voting rights at FOMC meetings in 2026, also used the term "gradual and orderly" when discussing rate cuts. Harker said that as long as the data performs as he expects, he supports a rate cut in September. He said: On September's interest rate cut process, we need to start steadily lowering them (policy rates).

As for the magnitude of the interest rate cut in September, Harker said he needs more confidence to determine. He said, "Right now, I'm not in the camp of a 25 basis point cut or a 50 basis point cut - I need to see a few more weeks of data."

Harker warned that it is better to focus on the prospect of steadily easing monetary policy rather than a specific interest rate cut magnitude, as any specific interest rate cut magnitude is not as important as the overall range of interest rate cuts.

"I think a slow, steady interest rate cut is the right approach," Harker mentioned.

He noted that the business representatives he communicated with called for the Fed to take predictable actions, not wanting an interest rate cut action as aggressive as the previous rate hikes.

Regarding the economic situation, Harker stated that the labor market is clearly softening, but hiring is in a normalization state. Although the U.S. unemployment rate has risen from a low of 3.4% in early last year to 4.3%, Harker pointed out that the peak unemployment rate is expected to be below 5%, considering the long-term potential of the labor market. As for inflation, Harker acknowledged that inflation will take some time to fall back to the Fed's target of 2%, and now "we are definitely heading in that direction, it may take at least about a year to reach the target."

The day before the speeches of the three Fed officials, the minutes of the Fed's July meeting released this Wednesday showed that the vast majority of Fed policymakers believe that it may be appropriate to cut interest rates in September if the data continues to meet their expectations. Some policymakers even wanted to act in the same month at the July meeting. Some comments suggest that the dovish Fed meeting minutes have reinforced the market's expectation of a rate cut in September, with a September rate cut seen as a "done deal"