On Monday Eastern Time, Jeff Schmid, President of the Federal Reserve Bank of Kansas, stated that given the uncertainty about how low the Federal Reserve should ultimately lower interest rates, he favors slowing the pace of rate cuts. This marks his first public speech since August this year. Schmid hopes for a "more normalized" policy cycle, with the Federal Reserve making "moderate" adjustments to maintain economic growth, price stability, and full employment. He said that slowing the pace of rate cuts would also allow the Federal Reserve to find a so-called neutral level, where policy neither drags down nor stimulates the economy.

"In the absence of significant shocks, I am optimistic that we can achieve such a cycle, but I believe the policy will be cautious and gradual," he added.

At last month's meeting, the Federal Reserve initiated an easing cycle with an aggressive cut of 50 basis points, which was also the first rate cut since the outbreak of the pandemic, due to signs of weakness in the labor market and inflation approaching the Federal Reserve's 2% target.

"Although I support easing policy restrictions, I am more inclined to avoid overdoing it, especially considering the uncertainty of where policy will ultimately go, and I want to avoid exacerbating financial market volatility," Schmid said.

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Economic data since the September meeting has shown that employment over the past three months has been stronger than initially expected, and market participants now expect the Federal Reserve to cut rates by 25 basis points at the meeting on November 6th and 7th.

Speaking about the labor market, Schmid said: "My view is that what we are seeing is normalization, not a serious deterioration in conditions. Employers no longer feel the need to hoard workers as they did after the outbreak, and recruitment efforts have also weakened."

"As employers make these adjustments, all of this will at least temporarily slow down the labor market," he added.

Schmid, who is a rotating voter next year, said he expects interest rates to be "far higher" than the levels of the decade before the pandemic. This change can be driven by higher productivity growth and investment, as well as an increase in government debt. He added that the structural forces at play before COVID-19, including an aging population, have not disappeared.

"It is difficult to know whether productivity, debt, or population structure will dominate among these factors, but we must be open to the possibility of interest rates being higher than before the pandemic," he added.Earlier on Monday, two other Federal Reserve officials also indicated that they would not support another substantial interest rate cut, but would prefer to adopt smaller rate cuts as the Fed continues to lower rates.

Dallas Fed President Logan said that due to various uncertainties in the economic environment, the Fed should be cautious in cutting interest rates, and she supports the use of "gradual" rate cuts.

"If the economy develops as I currently expect, a strategy of gradually reducing the policy interest rate to a more normal or neutral level can help manage risks and achieve our goals," she said.

Minneapolis Fed Kashkari said that he is currently inclined to slow down the pace of rate cuts in the next few quarters, but if the job market deteriorates sharply, he may advocate for accelerating the pace of rate cuts.

"At present, I expect a more moderate rate cut in the next few quarters to reach a neutral level, but this will depend on the data," he said.