Three Officials Pour Cold Water on Rate Cut Prospects

On Monday, Federal Reserve officials delivered a series of speeches, with several pouring cold water on the prospects for further rate cuts.

St. Louis Fed President Alberto Musalem stated that he supported the Fed's rate cut decision last week as an insurance measure against labor market weakness. However, he also noted that with inflation still elevated, the central bank has limited room for further rate cuts.

Atlanta Fed President Raphael Bostic also expressed satisfaction with last week's rate cut but saw little necessity for further easing this year, stating, "I am concerned that inflation has been too high for too long. Therefore, I would not support additional rate cuts today."

Additionally, new Fed Governor Stephen Miran spoke on Monday, striking a decidedly dovish tone. He argued that current interest rates are too high and called for significant, rapid rate cuts in the coming months to avoid unnecessary job losses in the labor market.

This week, more than ten Fed officials, including Chair Jerome Powell, are scheduled to deliver public remarks. According to the schedule, Powell will speak today on the economic outlook at the Greater Providence Chamber of Commerce in Warwick, Rhode Island, which may provide further clues regarding the interest rate trajectory.

According to the CME FedWatch Tool, the probability that the Fed maintains unchanged rates in October is currently 10.2%, while the probability of a 25-basis-point cut is 89.8%. For December, the probability of unchanged rates is 1.7%, the probability of a cumulative 25-basis-point cut is 23.1%, and the probability of a cumulative 50-basis-point cut is 75.3%.