Federal Reserve officials speak frequently, opening the door wide for another substantial interest rate cut.

Several Federal Reserve officials on Monday opened the door to further substantial interest rate cuts, noting that the current level of rates continues to put significant pressure on the U.S. economy. However, these Fed officials did not indicate a preference for repeating the Fed's 50 basis point rate cut from last week, and stated that upcoming data will guide their decisions. Chicago Fed President Austan Goolsbee stated at an event, "We have a long way to go in the next 12 months to get interest rates down to a neutral level to try to maintain the current economic conditions." Goolsbee predicted that the Fed's current benchmark rate is "hundreds of basis points" higher than the neutral rate. In terms of calling for rate cuts, Goolsbee's voice was stronger than other Fed officials. He emphasized that the U.S. employment situation and inflation are at favorable levels, but unless the Fed cuts rates "substantially" in the coming months, this situation will not continue. He said, "If you wait too long, you won't be in the best spot to accomplish the dual mandate." Goolsbee reiterated his point, warning that when the job market deteriorates, it does so more quickly than the central bank's rate cuts can alleviate. Historically, massive layoffs lead to a negative feedback loop in which unemployment leads to reduced spending, further causing other businesses to lay off employees in response to declining demand. Goolsbee said, "Waiting for the problem to arise is not realistic. If we want a soft landing, we cannot lag behind the situation." Regarding the rise in the unemployment rate from last year's historic low of 3.4% to 4.2%, Goolsbee said that this is a level most people consider to be consistent with full employment. Goolsbee, Atlanta Fed President Raphael Bostic, and Minneapolis Fed President Neel Kashkari all expressed their support for the Fed's decision to cut rates by 50 basis points last week. When it comes to how fast the Fed should cut rates, Bostic appears to be more cautious than Goolsbee. However, he also acknowledged that there may still be room for rate cuts before reaching the neutral rate. Bostic said at an event organized by the Centre for European Economic and Financial Research, "I can't think of anyone who would reasonably argue that we're not significantly above it (the neutral rate)." He also stated that uncertainties in inflation and employment should rule out the possibility of a rate cut exceeding 50 basis points. Bostic did not directly indicate whether he would support another 50 basis point rate cut, but he cautioned against assuming that last week's rate cut would be repeated. However, he also said, "If in the next month or so there is further evidence showing substantial weakness in the job market, it will definitely change my view on the pace of policy adjustments." For months, Fed policymakers have been debating where the neutral rate might be and whether it has risen since the pandemic severely disrupted the U.S. and global economies. Most economists believe that the neutral rate has gone up, although it is uncertain whether this is a temporary or permanent change. Kashkari pointed out that despite the high policy rate, the U.S. economy remains strong. He said, "The longer this economic resilience lasts, the more I believe that temporarily raising the neutral rate would actually be more structural." However, Kashkari added that the overall policy stance "remains biased towards tightness," and he leaned towards cutting rates by 25 basis points at each of the remaining two policy meetings this year. It is worth noting that Fed Governor Christopher Waller stated last Friday that unexpectedly positive inflation data in recent weeks prompted him to support a 50 basis point rate cut at last week's policy meeting, and he may support 25 basis point rate cuts at the upcoming two policy meetings. Waller added, "If labor market data deteriorates, or if inflation data continues to fall short of everyone's expectations, you may see the pace of rate cuts accelerate." However, he also pointed out that a resurgence in inflation could lead the Fed to pause rate cuts. Waller's views contrast with those of Fed Governor Michelle Bowman. Bowman stated last Friday that she voted against the Fed's decision to cut rates by 50 basis points at last week's policy meeting - the first dissent from a Fed official on a rate decision since September 2005 - because she is still concerned about inflation exceeding the target.