Yellen: Fed rate cut is a positive signal, monetary policy still has constraints.

On Thursday (September 19th) local time, US Treasury Secretary Yellen stated that the Fed's rate cut on Wednesday was a very positive signal for the US economy, reflecting progress in curbing inflation and the determination to protect the job market. The Fed announced a 50 basis point rate cut on Wednesday, lowering the federal funds target range to 4.75%-5.00%, exceeding market expectations. This is the first rate cut by the Fed since the start of the rate hike cycle in March 2022, marking the beginning of the much anticipated new round of rate cuts. Yellen participated in an event hosted by the Atlantic on Thursday and commented on the Fed's latest monetary policy action. Yellen said, "This reflects the Fed's confidence that inflation has dropped significantly and is moving towards the 2% target, with inflation risks significantly reduced." She added that the most important issue now is to ensure a strong job market. Previously released data showed that the US CPI rose by 2.5% year-on-year in August, falling for the 5th consecutive month, with a 0.2% increase month-on-month; the core CPI rose by 3.2% year-on-year in August, with a 0.3% increase month-on-month. Yellen said, "The monetary policy stance is still restrictive, and we expect rates to be further lowered. However, it is necessary to pay attention to the upcoming data as there are always surprises." The Fed's rate forecast "dot plot" shows that policymakers believe there will be another 50 basis point rate cut this year, a cumulative 100 basis point cut by 2025, and a 50 basis point cut in 2026, with rates expected to remain between 2.75% and 3% in the long term. Regarding the US job market, Yellen said that although it is not as hot as in the past two years, the labor market is still normal and healthy, and is expected to continue this trend. The US unemployment rate in August was 4.2%, and the Fed expressed confidence in keeping the unemployment rate at 4.4% by the end of this and the next year in its latest Economic Projections Summary. This article is reprinted from "Cai Lian She," GMTEight editor: Chen Xiaoyi.