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after the interest rate cut was announced, several federal reserve officials made intensive statements on monday.

chicago fed president goolsbee pointed out that the 50 basis point rate cut last week indicated that employment risks should be considered in addition to inflation; atlanta fed president bostic lowered the interest rate to restore it to a neutral level. minneapolis fed president kashkari believed that the fed's policy was still tight after the 50 basis point rate cut last week, and expected two more 25 basis point rate cuts this year.

all three officials said they supported the fed's decision to cut interest rates by 50 basis points last week. bloomberg's commentary pointed out that fed officials believe that the current interest rate level still poses a serious pressure on the us economy, opening the door to further substantial interest rate cuts. however, none of these officials are inclined to repeat the fed's practice of cutting interest rates by 50 basis points last week, and said that the upcoming data will guide their decision-making.

goolsbee: last week's 50 basis point rate cut required employment risks

"we have a long way to go over the next 12 months to get interest rates down to a neutral level to try to maintain the current economic conditions," goolsbee said at an event. goolsbee said he expects the fed's current benchmark rate to be "hundreds of basis points" above the neutral rate.

goolsbee has been more hawkish than other fed officials in calling for rate cuts. he stressed that u.s. employment and inflation are at favorable levels, but that won't last unless the fed cuts rates "substantially" in the coming months. "if you keep the restraint in place for too long, you won't stay in the sweet spot of the dual mandate for too long," he said.

gooles warned that when the job market deteriorates, it does so faster than the central bank can mitigate it through rate cuts. historically, mass layoffs have created a negative feedback loop in which job losses lead to reduced spending, which in turn leads to other businesses laying off workers in response to lower demand.

"it's unrealistic to wait for problems to arise," goolsbee said. "if we want a soft landing, we can't get behind the curve." as for the unemployment rate rising to 4.2% from the historic low of 3.4% hit last year, goolsbee said that's a level most people would consider to match full employment.

bostic: labor market is not in danger yet

bostic is clearly more cautious than goolsbee about how quickly the fed should cut rates, but he also acknowledged that the fed may have room to cut rates before reaching the neutral rate.

“i don’t know how anyone could reasonably argue that we are quite a ways above it (the neutral rate),” bostic said at an event organized by the european centre for economics and finance, adding that uncertainty over inflation and employment should rule out a rate cut of more than 50 basis points at a time.

bostic believes the labor market is weakening but not weak as unemployment rises, hiring slows and job openings fall from their 2022 peak.

“the labor market is not flashing red lights to me yet,” bostic said.

bostic did not directly say whether he would support another 50 basis point rate cut, and he warned against assuming a repeat of last week's rate cut. but he also said: "further evidence of material weakness in the labor market over the next month or so would certainly change my view on the magnitude of policy adjustments."

kashkari: expect two more 25 basis point rate cuts this year

for months, fed policymakers have debated where the neutral rate might be and whether it has risen since the pandemic severely disrupted the u.s. and global economies. most economists believe it has risen, though there is uncertainty whether the change is temporary or permanent.

kashkari noted that despite high policy rates, the u.s. economy remains strong. “the longer this economic resilience lasts, the more i think a temporary increase in the neutral rate may actually be more structural,” he said.

however, kashkari added that the overall policy stance "remains tight" and he favors a 25 basis point rate cut at each of the two remaining policy meetings this year.

it is worth mentioning that federal reserve board governor waller said on friday that unexpectedly favorable inflation data in recent weeks prompted him to support a 50 basis point rate cut at last week's policy meeting, and he may support a 25 basis point rate cut at the next two policy meetings.

“if the job market data deteriorates or if the inflation data continues to be weaker than everyone expects, then you could see a faster pace of rate cuts,” waller added. but he also noted that a resurgence in inflation could also cause the fed to pause in its rate cuts.

waller's views contrast with those of fed governor bowman, who said on friday she voted against the fed's 50 basis point rate cut at last week's policy meeting - the first time a fed official has dissented from a rate decision since september 2005 - because she remains concerned about above-target inflation.