Jerome Powell (Chair of the Federal Reserve)
A) Background and Reasons for Interest Rate Cuts
- The Fed determined that these interest rate cuts were necessary to fulfill its dual mandate of price stability and maximum employment.
- Cuts were deemed necessary to minimize negative impacts on the labor market and economy.
- The labor market has cooled considerably, and further cooling is not necessary.
- Inflation is heading towards 2%.
- The housing sector remains slow, but inflation is declining.
B) Interest Rate Outlook for Next Year
- Looking ahead to next year, the projected number of interest rate cuts has been reduced (25bp 4 times -> 2 times)
- Inflation has been high, and expected inflation remains at a high level.
- There is significant uncertainty regarding inflation, but further interest rate cuts are anticipated.
C) Conditions for Additional Interest Rate Cuts
- The Fed has cut rates by 100bp this year and is approaching the neutral rate.
- However, interest rate levels are still restrictive.
- If further progress is made in slowing inflation and the labor market remains strong, additional cuts will be carefully considered.
D) Outlook for US Economic Growth
- The US economy is very resilient and has good policy positioning.
- The economy grew by 2.5% this year, and inflation fell significantly to 2%.
- The recent slowdown in the pace of inflation reduction is due to the economy growing faster.
- Growth next year is expected to be faster than the September forecast.
- Therefore, further interest rate cuts require more caution.
- Inflation-related uncertainty has increased.
E) FOMC Internal Discussions and Inflation Risks
- Some committee members wanted to preemptively announce their outlook, while others did not.
- This is like moving around furniture in a dark room.
- The greater the uncertainty, the slower the movement should be.
- Upward pressure on inflation has increased significantly since September.
- This influenced the FOMC committee's decision.
- 12-month inflation is moving sideways.
- Further interest rate cuts require inflation to fall further.
F) Tariffs and Monetary Policy
- Whether tariffs will cause inflation and what impact they will have on the economy is something to consider later.
- Preparations are already in place.
- We need to respond carefully depending on the specifics of the policy.
- It is impossible to say how much retaliatory tariffs will be imposed, or what impact they will have on consumer prices.
- The impact of reduced trade with China and increased trade with other countries on the economy is unknown.
- These are questions that can be asked, but specific answers cannot be provided.
