Recently, several influential figures at the Federal Reserve have taken turns expressing their views, indicating that the labor market has cooled down and that future rate cuts will depend on "data-driven" decisions. This is akin to a group of doctors surrounding a patient, stating "the condition is improving" while also saying "further observation is needed." What is the real intention behind this? Is it a genuine attempt to stimulate the market by easing monetary policy, or is it a tactic to buy time?
Let's review the context first. With persistent high inflation and slowing economic growth in the United States, the Federal Reserve had initiated an aggressive interest rate hike cycle. However, the side effects of this forceful tightening are becoming increasingly apparent, with the risk of economic recession looming like the Sword of Damocles. The market's expectations for rate cuts are growing stronger.
Advertisement
Federal Reserve Vice Chairman Jefferson stated that the rate cut in September was "timely," and the labor market "has cooled down." Boston Federal Reserve President Collins also indicated that as inflation eases, the Federal Reserve is likely to further reduce rates. Dallas Federal Reserve President Logan was somewhat cautious, suggesting that future rate cuts should be smaller to prevent a resurgence of inflation. San Francisco Federal Reserve President Daly was relatively optimistic, believing that there may be one to two more rate cuts this year.
The statements from these influential figures seem harmonious, but there are undercurrents at play. Some are eager to "ease monetary policy," others are worried about the "return of the inflation tiger," and some are sitting on the fence, waiting and watching. This is like a game of chess, where everyone has their own hidden agenda.
Let's consider two examples.
First, look at the latest non-farm employment data in the United States. The number of new non-farm jobs added in September was lower than expected, and the unemployment rate rose, which seems to confirm the Federal Reserve officials' claims about the cooling labor market.
Second, consider the inflation data in the United States. The CPI in September rose by 3.7% year-on-year, higher than expected, casting a shadow over the Federal Reserve's plans for rate cuts.
These two examples, one supporting rate cuts and the other opposing them, put the Federal Reserve in a dilemma.
So, how will the Federal Reserve ultimately decide?
This is a million-dollar question.The decisions of the Federal Reserve not only influence the direction of the U.S. economy but also affect the nerves of the global financial market.
If the Federal Reserve continues to lower interest rates, it may stimulate economic growth, but it could also exacerbate inflation.
If the Federal Reserve stops cutting rates, it may curb inflation, but it could also lead to an economic recession.
This is like walking on a tightrope; any slight misstep could lead to a plunge into the abyss.
Are the "dovish" remarks of Federal Reserve officials sincere, or just a delaying tactic?
This requires us to observe carefully and think seriously.
Their statements are like a mirror, reflecting the complexity and uncertainty of the U.S. economy.
Their decisions are like a double-edged sword, capable of bringing both hope and risk.
How will the Federal Reserve's next move affect the global economy?