The Federal Reserve report indicates that the labor force supply is slowing down, with officials having differing opinions on the future direction of interest rates.

On Friday, the Federal Reserve submitted its semi-annual monetary policy report to Congress in June, stating that since the middle of 2024, there has been a significant reduction in immigration, leading to a slowdown in labor supply growth, which has helped to maintain balance in the labor market as employment growth gradually cools. The report stated: "Labor supply growth is not as strong as in previous years, mainly due to a significant decrease in immigration, coupled with a decrease in labor force participation rate." Nevertheless, the Federal Reserve still described the current U.S. job market as "robust," with job growth maintaining a "moderate" pace and the unemployment rate at a relatively low level. As labor demand has gradually cooled over the past few years, multiple indicators show that the labor market has returned to a balanced state, with tension easing compared to before the pandemic. Unemployment rates for different age, education, gender, and ethnic groups remain low, and improvements in the labor market are broadly distributed. The Federal Reserve reiterated in the report the recent views of Chairman Powell and other officials that current monetary policy remains flexible, and interest rates can remain unchanged while awaiting clearer economic outlook for decision-making. On Wednesday, the Federal Reserve kept the benchmark interest rate unchanged in the range of 4.25% to 4.5% for the fourth consecutive time, with officials hoping to further observe the specific impact of the Trump administration's latest tariff policy on the economy. Several Federal Reserve officials expressed their views on interest rates on Friday, and there were divergent opinions on the future direction of interest rates. San Francisco Fed President Daly indicated a preference for cutting rates "this fall." "By that time, we will have more data," Daly said in an interview on Friday, "Businesses also tell me that they expect some decision-making turning points in the fall." Despite calling the lower-than-expected inflation data in the past three months a "significant positive," she emphasized the need to balance inflation control and job promotion without being too hasty. In contrast, Federal Reserve Governor Waller took a more aggressive stance, suggesting that rates could be cut as early as July. "We can lower rates as soon as July," Waller said, noting that current U.S. GDP and inflation data are close to the Fed's target, and policy rates are still 1.25 to 1.5 percentage points above neutral levels, leaving room for rate cuts. He mentioned that in the event of unforeseen shocks such as the Middle East crisis in the future, the Federal Reserve could pause the rate-cutting process, but with mild inflation, "we have been on hold for six months, and now the data is doing well, it's time to take the next step." However, not all officials support a rate cut in the short term. Richmond Fed President Barkin stated that there is currently no urgent reason to cut rates, especially considering that new tariffs might push up prices, while the job market and consumer spending remain resilient. Talking to foreign media, he said, "I don't think the current data requires us to act quickly. I am very alert about inflation failing to reach the target for four years." Barkin pointed out that the unemployment rate remains at a low of 4.2%, companies have not shown signs of mass layoffs, and consumer spending remains "stable," neither hot nor weak. He stated: "No data in any direction currently forces us to take immediate action. Core inflation remains above the target, so maintaining moderate tightening in this situation is reasonable." Although the median forecast in the dot plot released at the June meeting shows that officials expect two rate cuts this year, seven policymakers expect no rate cuts this year, indicating significant divergences within the Fed. In addition, Barkin also highlighted the uncertainties brought by the new round of tariffs. He pointed out that currently, companies are generally "on hold" regarding whether to invest in capital or adjust labor force size, creating a balance of "low hiring - low layoffs." The Trump administration has set July 9 as the final deadline for countries to reach a trade agreement with the U.S., and if negotiations fail, the U.S. will impose higher tariffs on some imported goods. This could potentially impact consumer prices, business confidence, and supply chain stability, which are factors that make it difficult for the Federal Reserve to assess the consequences of its policies.