Remarks of Officials

European Central Bank (ECB) President Christine Lagarde highlighted that global economic growth is slowing, with the Euro area facing intensified trade uncertainties, weak domestic demand, and declining corporate investment. Although inflation has receded, the tight labor market and strong wage growth could still push core prices higher. Should the economic slowdown persist, rate cuts could become an option.

Federal Reserve Governor Adriana Kugler indicated that the Fed may continue holding the policy rate at its current level "for some time", as inflation continues to face important upside risks. The labor market has largely rebalanced, and wage growth is not a primary driver of inflationary pressures.

Federal Reserve Chairman Powell indicated that the Trump administration's tariff initiatives could potentially elevate inflation, although the extent of their impact remains to be seen. The Fed should adopt a wait-and-see approach, refraining from premature interest rate cuts until more comprehensive data becomes available. This underscores the Fed's cautious stance amidst the current intricate economic landscape, concurrently providing the market with crucial insights into the trajectory of future monetary policy.

Greek central bank chief Yannis Stournaras argued that it is premature to discuss pausing interest rate cuts, especially given the current economic pressures and the gradual easing of price pressures.

Despite a substantial decline in inflation, it has yet to fully reach the Federal Reserve's 2% target. As a result, monetary policy must maintain a degree of restrictiveness to ensure that inflation does not re-emerge.

Global market expectations for long-term interest rates have fundamentally shifted, and central banks need to adapt to the new inflationary environment and respond with appropriate policy responses.

The UK economy is experiencing sluggish growth, with a cooling labor market. Although inflation has declined, it remains above the target level. Swati Dhingra, member of the monetary policy committee at the Bank of England (BOE), has elaborated on her decision to call for interest rates to be slashed, saying taking a "gradual" approach would still leave monetary policy as a drag on the economy this year.

Given robust economic expansion, a stable labor market, and inflation persisting above the target, St. Louis Fed President Musalem supports maintaining the federal funds rate target range at 4.25%-4.50%. He indicated that the FOMC may face conflicting dual mandate objectives.

Chicago Federal Reserve President Austan Goolsbee on Thursday said he does not expect the inflation reading the U.S. central bank uses to set its inflation target to be as “sobering” as the previously reported Consumer Price Index figures.