The Federal Reserve is prepared to cut interest rates! St. Louis Fed President: Risks of high inflation and rising unemployment have become balanced

According to the Wise Finance APP, Alberto Musalem, President of the St. Louis Fed, stated on Thursday that the risks of current high inflation and rising unemployment have become more balanced, and the Fed is preparing to ease its restrictive monetary policy. His remarks once again hinted that unless there are unexpected economic shocks, the rate cut in September is already a trend. He said, "The risk of rising inflation seems to have decreased, while the risk of further increase in unemployment has increased. From my perspective, the risks on both aspects of the Fed's dual mandate seem more balanced. The time to adjust moderately restrictive policies may be approaching." Musalem took over as President of the St. Louis Fed in April this year. He will become a voting member of the Federal Open Market Committee (FOMC) in 2025, which is responsible for formulating the Fed's monetary policy. Since July 2023, the FOMC has kept the federal funds rate in the target range of 5.25% to 5.50%. The market widely expects that a rate cut cycle will begin in September, and Fed officials have not explicitly refuted this in recent speeches. Musalem does not believe that an economic recession is imminent, but he pointed out that there are still a series of possible scenarios for the U.S. economy. He expects the annualized GDP growth rate in the second half of 2024 to be between 1.5% and 2%. The unemployment rate rose from a low of 3.4% in 50 years to 4.3% in July this year. Wage growth has also slowed accordingly, easing the upward pressure on service sector inflation. At the same time, the easing of supply chain bottlenecks during the COVID-19 pandemic and the selective increase in consumer demand have also helped to suppress commodity price inflation. According to data released on Wednesday, the Consumer Price Index (CPI) rose by 2.9% year-on-year in July, the first time the annual inflation rate has been below 3% since March 2021. Musalem said, "There is still work to be done to combat inflation. The labor market has normalized and is no longer overheated... The tight labor market no longer seems to pose a clear upward risk to inflation." He also mentioned recent stock price volatility, especially the significant drop in major indices triggered by the July employment data and the recession concerns it raised. He stated that the Fed is currently not concerned about market volatility. Musalem said, "As a policy maker, I am only concerned about the extent to which volatility will tighten financial conditions, whether it will increase the cost of borrowing for businesses or issuing stocks, or raise consumer credit costs. If volatility is high enough or lasts long enough, it may affect the financing capabilities of companies or households, thereby affecting economic activity." He stated that recent volatility has not reached this standard and is unlikely to affect economic activity or Fed decisions