The economy is in a good position and inflation is moving back to target, so the Federal Reserve will need to cut interest rates further, but the size and timing of those cuts is unclear, Federal Reserve Governor Lisa Cook said Nov. 20.
“Going forward, I still see the direction of the appropriate policy rate path to be downward, but the magnitude and timing of rate cuts will depend on incoming data, the evolving outlook and the balance of risks,” Cook said in a speech at the University of Virginia, according to prepared remarks posted on the Fed’s website. “I do not view policy as being on a preset course, and I am ready to respond to a changing outlook. In fact, I find it helpful to consider a range of scenarios when thinking about the path of policy.”
The Federal Open Market Committee at its Nov. 7 meeting approved a quarter-point interest rate cut, a move that followed a half-point cut at its September meeting.
The committee’s next meeting is Dec. 17-18. Market participants predict there is a 56% chance the committee will initiate another quarter-point cut at that meeting, according to the CME FedWatch Tool that tracks trading in the 30-day fed funds futures.
The Fed’s preferred inflation gauge, the Personal Consumption Expenditures price index, rose 2.1% year-over-year in September, down from the 2.3% year-over-year rise in August. Core PCE, which excludes the volatile food and energy categories, increased an annualized 2.7% in September.
“Looking ahead, I remain confident that inflation is moving sustainably toward our 2% objective, even if the path is occasionally bumpy,” Cook said.
She later added, “Despite this significant progress on disinflation, the elevated core figure suggests that we have further to go before credibly achieving our inflation target of 2%.”
