On October 21st local time, Mary Daly, the President of the San Francisco Federal Reserve, stated, "There is no indication that the Federal Reserve will stop gradually reducing interest rates."

Daly is one of the 19 officials of the Federal Reserve and one of the 12 officials who vote on monetary policy for 2024. She emphasized that for the United States, an economy steadily moving towards a 2% inflation target, the current interest rates are still "very tight." As inflation decreases, the Federal Reserve needs to continue lowering policy rates; otherwise, there is a risk of making policy too restrictive and harming the labor market. "I don't want to see the labor market deteriorate."

Daly's remarks took place against the backdrop of the Federal Reserve's first interest rate cut this year. Recalling the Federal Reserve's decision in September to cut rates by 50 basis points, Daly said that officials who chose to cut rates by 50 basis points were almost "neck and neck" with those who chose a 25 basis point cut.

On that day, the three major U.S. stock indexes showed divergent performances: the Dow Jones Industrial Average weakened unilaterally, closing down 0.8%, while the Nasdaq Composite Index fluctuated and recovered during the session, closing up 0.27%, and the S&P 500 Index fell 0.18%.

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Since the Federal Reserve's interest rate cut, the current policy rate has been maintained within the range of 4.75% to 5%. Although Daly did not provide clear guidance on future rate cuts, she affirmed that the Federal Reserve will "continue to adjust policy to ensure it is more suitable for the current economic development." She estimated that a policy rate of around 3% would be neither tight nor loose, which is what economists refer to as "neutral."

It is worth noting that after the first interest rate cut, the U.S. inflation rate has shown signs of heating up. At the same time, mortgage rates have not only failed to decrease over the past three weeks but have actually risen. The latest data from Freddie Mac shows that the benchmark 30-year fixed rate for U.S. homebuyers has soared to 6.44%.

Daly's statement is undoubtedly a "shot in the arm," demonstrating to people that the Federal Reserve has shifted from a "hawkish" to a "dovish" stance with strong expectations. Several Federal Reserve policymakers now favor further rate cuts, albeit with slightly different views on the specific details of the cuts.

Recently, Jeffrey Schmid, the President of the Kansas City Federal Reserve, stated in Kansas City, Missouri, to the Certified Financial Analysts Society of Kansas City, that while he supports rate cuts, he prefers to avoid significant volatility, especially considering the uncertainty of the ultimate policy goals and financial markets.Schmid said that efforts should be made to avoid exacerbating "financial market volatility," and that rate cuts should be gradual and well-considered.

Earlier, Dallas Federal Reserve President Lori Logan made similar remarks in New York to the Securities Industry and Financial Markets Association.

Logan said, "If the economy develops as currently expected, gradually lowering the policy interest rate to a more normal or neutral level can help us manage risks and achieve our goals."

Minneapolis Federal Reserve President Neel Kashkari also expressed support for the idea of a slow rate cut and reiterated his call for moderate rate cuts in the coming "few quarters." However, he also said that if the labor market deteriorates sharply, it may prompt him to advocate for a faster rate cut.

"If we see real evidence that the labor market is weakening rapidly, then as a policymaker, this will tell me that maybe we should lower interest rates at a faster pace," Kashkari said.

After this week, Federal Reserve policymakers will enter a period of silence, during which they will no longer make any public comments on monetary policy until November 7th, when the Federal Reserve holds a two-day meeting and announces its policy decision again.