Fed's Gradual Rate Cut Strategy Amid Economic Risks

In a significant address at the Syma annual meeting in New York, Federal Reserve President Lori Logan emphasized a cautious strategy for future interest rate cuts. Logan stated that amid increased risks to the job market and potential inflation pressures, the Fed intends to lower the policy rate gradually toward a more neutral level if the economy evolves as expected. These comments reiterated sentiments expressed in previous weeks by various Fed officials regarding the need for a gradual approach amidst stronger-than-anticipated economic data, particularly in the job sector. Despite recent favorable job reports, Logan cautioned that downside risks have increased for the job market. In this context, fellow Fed officials, including Chris Waller and Neil Kashkari, have echoed the stance of proceeding with caution and potentially modest rate reductions in the upcoming months. While speculation also surrounds a possible pause or hold on rates in November, analysts believe a 25 basis point cut remains likely. With over 80% probability reflected in Fed fund Futures for such a cut, it highlights the market's expectation for the Fed to maintain its gradual approach to economic challenges while navigating inflation concerns.