Fed Officials Signal No Rush to Cut Interest Rates Before Inflation Eases Further

Stock News
02/06

Multiple Federal Reserve officials have reiterated that keeping interest rates steady remains the primary choice until inflation shows a steady decline towards the target level, amid ongoing market focus on internal policy divisions within the Fed. Atlanta Fed President Raphael Bostic stated on Thursday that inflation remains "too high and persistent," requiring monetary policy to maintain a "moderately restrictive" stance to increase the likelihood of returning inflation to the 2% target. Speaking at an event hosted by Clark Atlanta University's School of Business, he noted that a stable and relatively tight policy environment helps strengthen the Fed's credibility in achieving its inflation goal. According to the latest projections, the Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, rose about 3% year-over-year in December, still significantly above the 2% policy target. Bostic emphasized that high inflation squeezes American households' decision-making flexibility in multiple ways, forcing them to focus more on short-term living costs rather than long-term investments or entrepreneurial plans, thereby dampening consumption, business investment, and labor demand. Thus, controlling inflation is crucial for the overall economy's operation. Bostic is not a voting member of the Federal Open Market Committee (FOMC) in 2026 and will retire at the end of February. With no FOMC meeting scheduled for February, the January 27-28 meeting marked his final participation in a policy meeting during his tenure. Fed Governor Lisa Cook also stressed this week that completing the mission of bringing inflation back to the 2% target is vital for the Fed. She indicated that after nearly five years of above-target inflation, the Fed must restore its policy credibility by returning inflation to a downward trajectory and achieving the set goal within a relatively predictable timeframe. Nevertheless, Bostic acknowledged that changes in the labor market also require close monitoring. Data show that as of December 2025, the U.S. unemployment rate had risen to 4.4%, up from 3.8% at the end of 2023. However, he pointed out that historically, a 4.4% unemployment rate remains within an "exceptionally strong" range. Even with recent increases in layoffs and a decline in job openings, Bostic believes employment is not the biggest risk currently facing the economy. He also noted that compared to September of last year, corporate executives' concerns about the hiring market have eased, and the labor market is gradually moving toward a relatively stable state, providing policymakers room to "hold steady" in the near term. Discussing the macroeconomic environment, Bostic pointed out that the U.S. economy is undergoing a noticeable "period of disruption." Tariff policies and changes in immigration policy from the Trump administration have significantly impacted business operations and labor supply, posing greater challenges for the Fed in balancing its dual policy objectives of "price stability" and "full employment."

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