Fed Official Cautiously Optimistic on Rate Policy, Warns of Persistent Inflation Risks

Signs of Policy Effectiveness

A senior Federal Reserve official recently expressed cautious optimism regarding the current interest rate level, suggesting it may be effective in managing inflation while maintaining job market stability. She noted that upcoming economic data in the next few months will be crucial in validating this view.

She stated that if inflation continues to ease without harming employment, it would signal that current policies are working and no further rate cuts would be necessary.

Inflation Remains a Key Concern

Nonetheless, she emphasized that inflation is still a top priority. While additional rate cuts may be considered if the job market weakens alongside falling inflation, her current concern is that prices remain stubbornly high.

Policy Outlook

• Downside risks to the labor market have notably decreased, she said.
• Interest rates are believed to be in a neutral range, offering limited restraint on inflation.
• She anticipates progress on inflation this year and pointed to early signs of improvement.