Four Fed Policymakers Back Further Rate Cuts But Differ In Pacing

Four Federal Reserve policymakers expressed support for further cutting of interest rates. However, they differ on how fast such rate cuts should be made.

Reuters reported that three of the policymakers wanted to take it slow, basing their leaning on the strength of the economy and uncertainty in the outlook. They described their preferred pace for rate cuts as "gradual" and "modest." The fourth, however, did not share the same preference on pacing.

San Francisco Fed President Mary Daly, described the Fed policy as "very tight." She believes that the central bank may continue to reduce rates and that the continuous decline of inflation and a strong economy must not be a hindrance to do so.

Kansas City Fed President Jeffrey Schmid told the Certified Financial Analysts Society of Kansas City, in Missouri that the cuts on rates must be made gradually and deliberate.

"While I support dialing back the restrictiveness of policy, my preference would be to avoid outsized moves, especially given uncertainty over the eventual destination of policy and my desire to avoid contributing to financial market volatility," Schmid said.

"Lowering rates in a gradual fashion would provide time to observe the economy's reaction to our interest rate adjustments and give us the space to assess at what level interest rates are neither restricting nor boosting the economy," he added, USA Today reported.

Earlier, Dallas Fed President Lorie Logan, also issued similar remarks when she spoke to the Securities Industry and Financial Markets Association in New York.

"If the economy evolves as I currently expect, a strategy of gradually lowering the policy rate toward a more normal or neutral level can help manage the risks and achieve our goals," she stated.

Minneapolis Fed President Neel Kashkari, likewise expressed leaning towards the slow approach. On Monday, he repeated his call for a "modest" interest rate cut spread over succeeding several quarters.

While most of the Fed policymakers prefer to go the gradual or cautious way, Daly gave her reasons behind a contrasting preference when she did a webcast interview with the Wall Street Journal.

"I haven't seen any information that would suggest we wouldn't continue to reduce the interest rate consistent with achieving that durable expansion," she noted.

"This is a very tight interest rate for an economy that already is on the path to 2% inflation, and I don't want to see the labor market slow further," Daly added.

The differences in opinion give a partial overview to what could be expected at the upcoming Fed policy meeting on Nov. 6-7 as policymakers would be engaged in a closed-door debate on the path forward.

After Friday, U.S. central bankers will be abstained from issuing comments on their views on the Fed's monetary policy until they would be announcing their policy decisions at the end of the two-day meeting on Nov. 7.