Federal Reserve officials signal cautious easing, candidate list for chair reduced to five

Several senior officials from the Federal Reserve recently conveyed signals of "conditional interest rate cuts" in public speeches, indicating that decision-makers are maintaining a delicate balance between addressing economic slowdown and inflationary pressures. Meanwhile, the list of candidates for the next Federal Reserve Chair has been narrowed down to five individuals. According to the Zhitong Finance APP, St. Louis Fed President James Bullard stated on Friday that he supports the 25 basis point rate cut implemented last month, describing it as an "insurance measure to address the weakness in the labor market." He also emphasized that monetary policy needs to remain cautious to prevent excessive easing from leading to a rebound in inflation risks. Bullard pointed out that about 10% of the current inflation increase is due to tariff impacts, which are expected to gradually dissipate in the second half of next year. He added that if the job market continues to deteriorate, further rate cuts cannot be ruled out, but "the room for easing is limited." On the same day, Fed Governor Christopher Waller also expressed support for continued rate cuts in an interview, but stressed that "caution is necessary." He noted that the U.S. labor market may be losing jobs while GDP continues to show strong growth, leading to a divergence in economic signals. "Either the labor market needs to recover to match GDP growth, or economic growth will slow to accommodate the labor market slowdown," Waller said. "In either case, it will affect the direction of monetary policy." At the September policy meeting, the Federal Reserve lowered the benchmark interest rate by 25 basis points for the first time since December 2024 and hinted at the possibility of two more cuts within the year in the dot plot. Waller expressed satisfaction with this pace but opposed larger adjustments. His new colleague, Governor Kevin McCarthy, appointed by President Trump, advocated for a one-time 50 basis point cut and hopes for a cumulative reduction of 1.25 percentage points by the end of the year. It is reported that Waller is currently one of the five candidates for the Federal Reserve Chair. U.S. Treasury Secretary Steven Mnuchin recently had a lengthy meeting with Waller and will submit the final candidate list to Trump after completing the second round of interviews. Mnuchin emphasized that candidates should maintain an open mind regarding monetary policy and possess extensive experience in economics, regulation, and institutional management. Senior Treasury officials revealed that the final five candidates include: current Fed Vice Chair for Supervision Michelle Bowman, Governor Christopher Waller, Director of the White House National Economic Council Kevin Hassett, former Fed Governor Kevin Warsh, and BlackRock's Chief Investment Officer for Global Fixed Income Rick Rieder. Although Rieder has not served at the Fed, he has gained favor for his deep insights into the bond market and media exposure. Mnuchin has recently publicly criticized the Federal Reserve as "bloated and inefficient," advocating for a reassessment of its policy framework and functional boundaries. He hopes the new chair can push the central bank to "slim down" and reduce reliance on unconventional tools such as quantitative easing. According to Treasury sources, the second round of interviews is expected to take place after Thanksgiving, with the final nomination potentially submitted as early as January 2026. Current Chair Jerome Powell's term is set to expire in May next year