Do not rush to cut interest rates before inflation falls back, Federal Reserve officials once again release a "wait and see" signal.

As internal policy divisions at the Federal Reserve continue to attract market attention, several officials have reiterated that maintaining interest rates unchanged remains the top choice until inflation steadily falls back to the target level. Atlanta Federal Reserve President Bostic stated on Thursday that the inflation level is "too high and has lasted too long," which requires monetary policy to maintain a "moderately restrictive" stance to increase the likelihood of inflation returning to the 2% target. He pointed out at an event at the Clark Atlanta University School of Business that a stable and somewhat tight policy environment helps strengthen the Fed's credibility in achieving its inflation target. According to the latest forecasts, the Fed's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, had a year-on-year increase of about 3% in December of last year, significantly higher than the 2% policy target. Bostic emphasized that high inflation would squeeze decision-making space for American households in many ways, causing them to focus more on short-term living costs rather than long-term investment or entrepreneurial plans, thereby weighing down consumption, business investment, and job demand. Therefore, controlling inflation is crucial for the overall economic performance. Bostic is not a voting member of the Federal Open Market Committee (FOMC) in 2026 and he will retire at the end of February. Since there is no FOMC meeting in February, the meeting on January 27-28 became his last participation in a rate-setting meeting during his term. Fed Governor Quarles also emphasized this week the importance of completing the mission of bringing inflation back to the 2% target for the Fed. She stated that after experiencing nearly five years of inflation above the target, the Fed must maintain its policy credibility by returning to a downward inflation trajectory and achieving its established target within a relatively predictable time frame. Nevertheless, Bostic also acknowledged that changes in the labor market also need close attention. Data shows that as of December 2025, the U.S. unemployment rate had risen to 4.4%, higher than the 3.8% at the end of 2023. However, he pointed out that from a historical perspective, a 4.4% unemployment rate is still in an "exceptionally strong" range. Even though recent job cuts have increased and job vacancies have declined, Bostic believes that employment is not the biggest risk facing the current economy. He also stated that compared to September last year, executive concerns about the hiring market have eased, and the labor market is gradually moving towards a relatively stable state, providing policymakers with space to "stay put" in the short term. When discussing the macroeconomic environment, Bostic noted that the U.S. economy is going through a period of significant "disruptions." The Trump administration's tariff policies and changes in immigration policies have had a significant impact on business operations and labor supply, posing a greater challenge for the Fed in balancing the two major policy goals of "price stability" and "full employment."