Against the backdrop of uncertain global economic prospects, several decision-makers of the Federal Reserve have recently expressed support for a cautious policy approach, emphasizing that the current monetary policy is "just right" and not in a hurry to adjust interest rates. The statements of officials such as New York Fed President Williams and Chicago Fed President Goolsby highlight the Fed's cautious attitude in the face of complex economic data and changing policy environment.

1、 Monetary Policy 'Just Right': Consensus of the Federal Reserve

New York Fed President Williams made it clear in his speech last Friday that the current moderately restrictive monetary policy stance is entirely appropriate. He pointed out that although the inflation rate is slightly higher than the target of 2%, the labor market is stable and the economy is performing well. Williams emphasized that the Federal Reserve does not need to rush to adjust interest rates, but rather needs more time to observe changes in economic data.

Williams also mentioned that future interest rates will eventually need to be lowered to neutral levels, but in the current rapidly changing and unpredictable policy environment, the downside risks to economic growth and the upside risks to inflation are both very high. Therefore, the Federal Reserve chooses to maintain policy stability to cope with future uncertainty.

2、 Uncertainty shrouds: a common concern for policy makers

Chicago Fed President Goolsby also expressed a similar view. He believes that uncertainty will keep the Federal Reserve on the sidelines until the situation becomes clearer. Gulsby specifically mentioned that although the US economy is strong, the Trump administration's tariff policies may have complex impacts on inflation, and many economists expect tariffs to exacerbate inflationary pressures.

Williams further pointed out that the US economy will perform steadily in early 2025, but the process of inflation cooling down will not be smooth. Although the job market is in a better state of balance, factors such as a decrease in immigration may lead to a slowdown in economic growth. He emphasized that the future economic trend is highly dependent on fiscal policy, trade policy, and geopolitical developments, and the uncertainty of these factors makes it exceptionally difficult to predict the economic outlook.

3、 Inflation Expectations and Public Confidence: Complex Signals of Data

Williams also mentioned that recent data shows a significant increase in short-term inflation expectations, but long-term inflation expectations remain stable. He pointed out that households generally expect inflation shocks to gradually weaken in the coming years, which is consistent with the trend of inflation expectations before the pandemic. In addition, public confidence has declined due to the Trump administration's significant streamlining of the federal government and spending cuts, adding uncertainty to the economic outlook.

4、 Slowing down the pace of shrinking the balance sheet: internal differences of opinion

Williams supports the decision to slow down the pace of the Federal Reserve's balance sheet policy, believing it to be the "natural next step" in the process of reducing the balance sheet. However, Federal Reserve Governor Waller disagrees with this, believing that there is ample liquidity in the financial system and continuing to shrink the balance sheet will not pose a threat to market stability. Waller advocates maintaining the current pace of balance sheet reduction and calls for the development of clearer liquidity management plans.

Cleveland Fed President Hamack emphasized his desire to steadily reduce the balance sheet while utilizing existing tools to cope with market volatility. At present, the size of the Federal Reserve's balance sheet is about $6.81 trillion, and the process of shrinking the balance sheet is still ongoing, but the pace has significantly slowed down.

Conclusion: Moving forward cautiously, the Federal Reserve's' balancing act '

Faced with a complex economic environment and policy uncertainty, the Federal Reserve has chosen a cautious policy approach. Whether it is interest rate policy or balance sheet management, the Federal Reserve is striving to balance the relationship between economic growth, inflation control, and market stability. In the future, with the release of more economic data and the clarification of the policy environment, how the Federal Reserve's "balancing act" will be interpreted will still be the focus of market attention.