Following the Federal Reserve's interest rate cut of 50 basis points last month, several officials continue to express their support for the decision and believe that further rate reductions will occur this year.

Last month, the Federal Reserve cut interest rates for the first time since the outbreak of the pandemic, reducing borrowing costs by more than the expected 50 basis points. Federal Reserve Chairman Powell stated that this move was aimed at protecting the U.S. labor market as inflation rates are approaching the Federal Reserve's 2% target.

The September employment report released last week was remarkable, alleviating concerns about a cooling job market and providing policymakers with more room to reduce rates at a slower pace. Investors currently anticipate that the Federal Reserve will cut rates by 25 basis points in November, with a similar move expected in December.

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The minutes of the September 17-18 meeting, released on Wednesday, showed that "the vast majority" of policymakers supported a substantial rate cut but also indicated that there was intense debate surrounding the decision. "Some" participants preferred a 25 basis point rate cut, while "others" indicated that they could have supported such a move.

Mary Daly, President of the Federal Reserve Bank of San Francisco, stated on Wednesday that she "fully" supports the Federal Reserve's 50 basis point rate cut last month and indicated that there may be one or two more rate cuts this year if the economy develops as she expects.

In an interview with KTVB anchor Carolyn Holly at Boise State University, Daly said, "The labor market has slowed down." She added that she is now "very confident" that inflation is moving towards the Federal Reserve's 2% target.

Daly noted that since July 2023, the Federal Reserve's policy interest rate has remained within the range of 5.25%-5.50%, but with no changes, the real interest rate is increasing, "which, in my view, is ultimately a recipe for undermining the economy...and there are no new gains on the inflation trajectory."

She also pointed out, "I do not want to see the labor market slow down further."

Therefore, she stated that the 50 basis point rate cut last month was a way to "align policy with the economy." "We cannot predict what we will do at our next meeting. Nor can we tell you the speed or magnitude of further adjustments.""Considering my forecast for the economy, the possibility of two more rate cuts this year, or one more rate cut this year, is indeed within the range I consider possible," Daly stated.

Daly added that she believes the labor market, with an unemployment rate of 4.1%, is currently at full employment.

Boston Fed President Collins

Similarly, Boston Fed President Collins also stated that due to the decline in inflation, the economy is more susceptible to shocks, and officials were "prudent" to lower interest rates by 50 basis points last month.

"In this situation, I believe that initially lowering interest rates by 50 basis points was prudent because I recognize that monetary policy is still in a restrictive area," Collins pointed out in a speech prepared for an event in Worcester, Massachusetts on Wednesday, "further adjustments to (policy) may be needed."

The Boston Fed President largely repeated her remarks from Tuesday, including her belief that policymakers should adopt a "prudent, data-based approach" when cutting interest rates, to help maintain the strong momentum of the US economy. She once again emphasized that policy is not on a predetermined path.