Three senior officials of the Federal Reserve stated: Maintaining an open attitude towards the December interest rate decision

Three Federal Reserve officials made it clear on Monday that they expect the Fed to continue cutting interest rates next year, but did not say they are committed to the next rate cut later this month.

"Hawkish" Governor Waller: Prefers to Cut Rates in December

Federal Reserve Governor Christopher Waller stated that he leans towards voting in favor of a rate cut at the upcoming Federal Open Market Committee (FOMC) meeting later this month, although the data released before then may justify keeping rates steady.

"Currently, I tend to support lowering the policy rate at the December meeting, but this decision will depend on whether the data we receive before then surprises to the upside and changes my forecast for the inflation path," Waller said in prepared remarks at a Federal Reserve framework review meeting hosted by the American Enterprise Institute in Washington.

Waller noted that recent data has raised concerns about inflation potentially stagnating above the 2% target, but he added, "there are no signs that" prices in key service categories should remain at current levels or rise.

In his remarks, Waller stated, "I believe there is strong evidence that policy remains significantly restrictive, and another rate cut would simply mean we are not pressing the brake pedal as hard. Another factor supporting further rate cuts is that the labor market seems to have finally reached a balance, and we should be committed to maintaining that balance."

Waller briefly commented on the next framework review that the Fed will initiate in January next year.

He described the current flexible average inflation targeting strategy as a lagging view, which aims to keep inflation slightly above the Fed's 2% target to compensate for periods of too-low inflation.

Waller said, "When we designed this framework, we thought the low inflation problem would persist. But within a year, as inflation rose, the entire framework collapsed."

He stated, "Regardless of economic conditions, the monetary policy strategy should be robust." He also criticized the flexible average inflation targeting as not being intuitive or clear enough for the public.

New York Fed President Williams: More Rate Cuts May Be Needed Over Time

In contrast to Waller's clear support for a December rate cut, New York Fed President John Williams did not disclose whether he supports a rate cut in December during his remarks on Monday. However, he indicated that the risks to inflation and employment have become more balanced, and officials may need to lower rates further to bring policy to a neutral stance. He added that decisions will be made at successive meetings.

In prepared remarks for an event with the Queens Chamber of Commerce in New York, Williams said, "I expect that over time, continuing to shift towards a more neutral policy setting will be appropriate. The policy path will depend on the data. If there is one thing we have learned over the past five years, it is that the outlook remains highly uncertain."

Williams stated that the economic situation is good, and the labor market is solid. Demand for workers has cooled, and the supply of workers has increased, making it unlikely that the labor market will add inflationary pressure in the future.He also stated that although the inflation rate is still above the Federal Reserve's 2% target, there is reason to believe that the inflation rate will reach the target, citing the slowdown in inflation rates for goods and services excluding food, energy, and housing.

"Hawkish" FOMC voter Bostic: Keeping an "open" attitude towards the December interest rate decision

2024 FOMC voter and Atlanta Fed President Bostic stated on Monday that he has not yet decided whether a rate cut is needed this month, but still believes that officials should continue to lower rates in the coming months.

In an article published on Monday, Bostic wrote, "The risks to achieving the committee's dual mandate of maximum employment and stable prices have shifted, bringing them roughly into balance, so we should likewise begin to shift monetary policy to a stance that neither stimulates nor suppresses economic activity."

Bostic stated that he believes inflation is on a sustainable path toward the Federal Reserve's 2% target, despite some bumps in the data. He also noted that there are no signs of a rapid deterioration in the labor market, but decision-makers need to remain vigilant about the risks to inflation and employment.

In a separate call with reporters, he said, "I am open to whether officials will support a rate cut when they gather in Washington on December 17-18."

Bostic expressed his support for recent rate cuts, as inflation is expected to reach the Federal Reserve's 2% target. He also mentioned that the reduction in job vacancies demonstrates that restrictive monetary policy is helping to cool the labor market. Nevertheless, he emphasized that the labor market remains stable.

Bostic stated, "These trends do not send a strong signal, nor do they indicate that the labor market is rapidly deteriorating or extremely tight. On the contrary, the data suggest that the labor market is cooling in an orderly manner in the face of rising interest rates, and we have heard this perspective from our business contacts."

Bostic listed several reasons why he believes inflation will continue to decline. Specifically, he stated that softening rents will ultimately lead to a decrease in housing inflation, which has been a key factor in overall price pressures over the past year. Bostic said, "There are certainly upside risks to price stability," but he added, "I do not believe that the recent bumps are a sign that progress on price stability has completely stalled."

When asked about the potential impact of tariffs that President-elect Trump might impose on his economic outlook, Bostic said he would ask his staff to wait until it is clearer what kind of fiscal policy will be enacted.

Bostic stated, "One of the things we've seen over the past six or seven years is that many proposals have been put forward, and over time, those proposals have changed a lot."

After raising interest rates to a peak of 5.25% to 5.5%, Federal Reserve officials began cutting rates in September, which helped to cool inflation pressures from a peak of 7.2% in mid-2022. However, after recent data showed persistent inflation in the services sector, investors in December futures contracts believe that the rate-cutting cycle may pause. The personal consumption expenditures price index, excluding food and energy, rose 2.8% in the 12 months ending in OctoberDespite U.S. officials describing their policy as "restrictive," the U.S. gross domestic product grew by 2.8% year-on-year in the most recent quarter. Personal spending and business equipment spending remain strong.

Federal Reserve Chairman Jerome Powell has been monitoring the risks of a weak labor market, but interpreting the data clearly has been challenging due to the impacts of strikes and storms. The U.S. Bureau of Labor Statistics will release the non-farm payroll report for November on Friday.

The next FOMC meeting will be held in Washington from December 17 to 18