The "three hands" of the Federal Reserve downplay rate cut expectations: monetary policy is in a relatively appropriate position, and there is no urgent need for adjustment.

The "third-in-command" of the Federal Reserve, New York Fed President Williams, stated that there is currently no urgent need for further adjustments to the interest rate policy, and recent data on employment and inflation has not substantially altered his assessment of the economic situation and monetary policy outlook. In an interview on Friday, Williams pointed out that the Fed had already implemented interest rate cuts in three consecutive policy meetings, putting the monetary policy in a relatively appropriate position. "Personally, I do not see an urgent need for further monetary policy action now, because the rate cuts we have done have put the policy stance in a very good place," he said. "I would like to see inflation return to the target level of 2% without causing excessive harm to the labor market, which is a balance that needs to be carefully considered." His remarks highlight the high uncertainty faced by the Fed on whether and when to continue cutting interest rates after consecutive cuts. Despite officials choosing to lower rates in the past three rate meetings, there are still disagreements within the decision-making body on the outlook for inflation and employment. The Fed's latest economic projections released last week indicate that officials expect only one more rate cut in 2026. Regarding the employment and inflation data released this week, Williams noted that some of the performance has been influenced by short-term distortions caused by the recent government shutdown. However, he also emphasized that in the longer term, the data still shows potential inflation steadily moving towards the Fed's 2% target, and the labor market is gradually cooling down, overall in line with the Fed's expectation of an "orderly slowdown" in the economy.