Federal Reserve Officials Turn Hawkish Overnight, Further Rate Cut Space May Be Limited

On November 14th, Federal Reserve officials collectively adopted a hawkish stance overnight, further constricting the scope for interest rate cuts. The President of the Minneapolis Fed, Kashkari, took the lead in stating that he did not endorse the Fed's October rate cut decision but remains vigilant about the most appropriate course of action for the December meeting. The underlying resilience of the U.S. economic activity is stronger than anticipated. The Fed had previously signaled a pause in rate cuts at the October meeting. On the other hand, Fed's Harker stated that monetary policy still needs to remain tight in order to curb inflation and bring it back to the target level. The Fed faces challenges in its dual mandate of inflation and employment, making this a difficult period for monetary policy. Harker also expressed no worry about the weakening of the dollar, saying, "We began from a state where the dollar was extremely strong. Therefore, this year's weakening is mainly bringing the dollar closer to its theoretically fair value and making it more reasonable compared to other currencies." Fed's Mester held a relatively moderate stance but still indicated that there is limited room for further easing of monetary policy. Mester stated, "Looking ahead, we need to move forward cautiously. I believe we need to continue exerting pressure on inflation above the target while providing some support for the labor market."