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FED officials made important assessments regarding the labor market and monetary policy outlook.
Federal Reserve Board Member Beth M. Hammack said the current unemployment rate, at 4.3%, is close to full employment, but a slight increase is likely in the coming period. Hammack argued that while layoffs are consistent, there are signs of fragility in the labor market and employment data are showing signs of weakness.
Hammack noted that companies are reluctant to hire, adding that inflation is expected to continue rising. He also said that last week’s interest rate cut was driven by a shift in risk balances.
Richmond Fed President Thomas Barkin stated that wage pressures are steadily easing and that labor force growth will remain limited this year. Barkin noted that low unemployment, wage increases, and strong stock market prices are supporting consumer spending, but businesses remain cautious about new investments. Barkin noted that optimism in the business world has increased somewhat, adding that while economic uncertainty has diminished, vulnerabilities to the outlook remain.
Fed Board Member Stephen Miran stated that the slowdown in population growth due to immigration policies is putting downward pressure on the natural interest rate. Milan said that keeping short-term interest rates approximately 2 percentage points above the appropriate level could lead to unnecessary layoffs and higher unemployment, and described current monetary policy as “too tight.”
Milan said he believes the appropriate federal funds rate should be around 2%. He also noted that tariffs could create fluctuations in national savings, and net-zero immigration could lower rental inflation by about 1 percentage point per year. Implementing a series of 50 basis point interest rate cuts would recalibrate policy, he said.
*This is not investment advice.
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