Fed Officials Question Need for Further Rate Cuts Amid Inflation Concerns
Federal Reserve officials signaled on Monday that additional interest rate cuts may not be necessary as inflation remains above the central bank’s 2% target and the U.S. labor market stays strong.
In separate remarks, St. Louis Fed President Alberto Musalem and Atlanta Fed President Raphael Bostic emphasized that while last week’s 25-basis-point cut helped safeguard against rising unemployment, controlling inflation is still the Fed’s top priority.
Musalem, speaking at the Brookings Institution in Washington, D.C., supported the small cut but warned against easing too much. He cautioned that further reductions could make policy overly accommodative, stressing that monetary policy must continue to guard against persistent inflation.
Bostic echoed similar views in an interview with the Wall Street Journal, saying the recent cut may be the only one needed this year since inflation remains about a full percentage point above the Fed’s target. He added that he would not currently support another cut at the upcoming October meeting.
Their comments highlight the ongoing debate within the Fed about the pace of rate adjustments. Fed Governor Stephen Miran, who opposed last week’s decision and argued for a larger half-point cut, is expected to present his case for more aggressive reductions later on Monday.
While Musalem is a voting member on rate policy this year, Bostic is not. Musalem stressed that keeping rates high enough to offset inflation risks is essential, even if it means limited support for the job market.
Last week’s meeting showed a divided Fed. The median projection pointed to two more quarter-point cuts by the end of 2025, but seven policymakers believe no further cuts are warranted.
