On Tuesday, September 30, Susan Collins, the President of the Federal Reserve Bank of Boston, delivered a speech at the Council on Foreign Relations (CFR) in New York, expressing that if economic data shows increased risks of weakening inflation and rising unemployment rates, it would be appropriate for the Federal Reserve to further cut interest rates this year.
She stated, “Perhaps another slight rate cut would be suitable this year, but it must be supported by data.”
Collins added, “I still believe that maintaining a moderately tight policy stance is appropriate, as policymakers are working to restore price stability while limiting the risk of further weakening in the labor market.”
Collins is not the only Federal Reserve official expressing concerns about unemployment. Vice Chairman of the Federal Reserve, Philip Jefferson, also indicated that the downside risks to the job market are increasing, with a possibility of a slight increase in the unemployment rate this year before decreasing next year.
During a speech in Finland, Jefferson stated, “With an unemployment rate of 4.3% and the labor market weakening, without support, it could face greater pressure.”
Jefferson did not hint at further rate cuts, only mentioning that the rate levels would be evaluated based on forthcoming data and disclosed his support for a 25-basis point rate cut at the Federal Reserve meeting on September 17.
Since the Federal Reserve meeting on September 17, policymakers have publicly expressed varying views on future monetary policy, intensifying internal debates on interest rates.
On September 17, Federal Reserve policymakers provided a median forecast of two more rate cuts in 2025, but there were significant disagreements among members. Federal Reserve Governor Stephen Miran opposed only a one-point rate cut, arguing for a more substantial decrease.
Miran continues to advocate for further rate cuts, believing that the current rate levels pose risks to the U.S. economy.
In August, the U.S. added only 22,000 new jobs, causing the unemployment rate to increase from 4.2% to 4.3%.
The employment figures for June were revised to a negative value, with a reduction of 13,000 jobs; and the job growth rate in July was lower than the same period last year, marking a third consecutive month of slowing employment growth.
However, Collins mentioned that the job market will not further deteriorate, and as businesses adapt to the new tariff environment, recruitment will rebound, although the pace may be slow, potentially leading to a “more significant and unwelcome increase in the unemployment rate.”
Collins predicts that inflation will remain high next year, gradually returning to the Federal Reserve’s 2% target in the medium term.
She emphasized that in the current “highly uncertain” environment, it is not ruled out that inflation could be higher and more prolonged, the labor market could be weaker, or both scenarios could occur simultaneously.
Jefferson noted that higher tariffs have pushed up prices of certain goods. He anticipates that in the coming months, the impact of tariffs on inflation, employment, and economic activity will become more apparent.
He indicated that inflation is expected to resume a downward trend after this year and return to the Federal Reserve’s 2% target in the next few years.
Meanwhile, other Federal Reserve officials are also concerned about the trend of inflation. Beth Hammack, President of the Federal Reserve Bank of Cleveland, stated on Monday, September 29, “Inflation remains too high and is moving in the wrong direction.”
She pointed out that the inflation rate of core services has risen again in recent months, and it is challenging to link it to the impact of tariffs.
She added that she is beginning to see vulnerability in the wage aspect of the job market, but has not observed an increase in “WARN signals” (Worker Adjustment and Retraining Notification Act), indicating that the unemployment rate is unlikely to rise rapidly due to layoffs in the short term.