Chicago Fed Chair Goolsbee: Rate cuts are still possible, but uncertainty is rising.
Despite recent market uncertainties regarding the direction of the Federal Reserve's policies, Chicago Fed President Goolsbee stated on Friday that he still believes there is a possibility of interest rate cuts in the future.
The Federal Reserve lost 77.6 billion dollars last year! It has suffered consecutive losses for two years, and interest rate hikes are the main culprit.
This is the second consecutive year the Federal Reserve has experienced significant losses, with a loss of as much as 114.5 billion dollars in 2023. Analysts believe these losses are the side effects of the Federal Reserve's strong support for the economy during the pandemic in 2020 and 2021, as well as the substantial interest rate hikes in 2022 and 2023 to combat high inflation. Predictions indicate that if short-term interest rates remain above 4%, the Federal Reserve will continue to incur losses this year; however, if rates continue to decrease, the Federal Reserve may achieve profitability.
The dovish voting member of the Federal Reserve: still believes that interest rate cuts are possible, although the risks of this outlook are increasing.
Fed dove and Chicago Fed President Goolsbee indicated that he still believes a rate cut is possible, although the risks to that outlook are increasing. If progress can continue to be made on inflation in the long term, it is believed that interest rates will decline over the next 12 to 18 months. On the same day, the Fed's third-ranking official, New York Fed President Williams, stated that recent data is sending mixed signals and that the Indicators of policy uncertainty have risen sharply in recent months.
The "number three" of the Federal Reserve: the economic outlook is full of uncertainties and the current interest rate level is appropriate.
① The President of the New York Federal Reserve, Williams, stated that given the economic performance in a considerably uncertain environment, the current MMF policy of the Federal Reserve is in the right position; ② This week, the Federal Reserve held rates steady for the second consecutive time at the interest rate meeting, maintaining the target Range for the federal funds rate at 4.25% to 4.5%, and also kept the forecast of two rate cuts this year.
It is unusual that the US dollar has fallen along with US stocks for such a long time!
Goldman Sachs pointed out that, typically, the dollar tends to strengthen during the early stages of stock market corrections; however, this time, the dollar declined simultaneously as the stock market was repriced. If concerns about the USA's economic outlook and better returns overseas persist, the simultaneous decline of the dollar and US stocks may continue in the short term.
New York Fed President Williams: The MMF policy stance is appropriate, and the Federal Reserve can respond flexibly to new situations.
Williams stated that despite the rapid changes in immigration policy, trade policy, and fiscal policy bringing a high level of uncertainty to the economic outlook, the current MMF policy stance is appropriate and allows the Federal Reserve to respond flexibly to any new developments that may arise.