Fed officials suggest initiating rate cuts “soon”

Jackson Hole. Ahead of a meeting of bankers in Jackson Hole, Wyoming, Federal Reserve policymakers said Thursday that with inflation well below its peak, they are paying close attention to the U.S. labor market in gauging when to start cutting interest rates, with one saying they should act “soon.”

“I think it’s appropriate to start easing early,” Boston Fed President Susan Collins said, signaling her likely support for a rate cut at the U.S. central bank’s meeting next month.

Inflation has eased “quite a bit,” Collins told Fox Business.

The Fed targets annual inflation of 2 percent based on the personal consumption expenditures price index. According to that measure, inflation reached 2.5 percent in July.

With labor markets generally healthy and preserving that health a priority, Collins said, “I think a gradual, methodical pace[of interest rate cuts]once we get into a different monetary stance will probably be appropriate.”

His view contrasts with that of Kansas City Fed President Jeff Schmid, one of the central bank’s most hawkish policymakers.

“We need to get some data before September,” Schmid told CNBC, referring to the Fed’s Sept. 17-18 policy meeting. “There’s some room to consider where we go from here, but frankly I think we have time.”

However, he added that the recent rise in the unemployment rate, which stood at 4.3 percent in July, was “worth a closer look.”

“I’m going to let the data show where we’re headed… I would agree with a number of my colleagues that they probably want to act perhaps before (inflation) gets to two (percent), but that sustainability up to two (percent) I think is really important.”

The U.S. central bank is expected to begin cutting its benchmark interest rate at its next meeting, with most Fed officials encouraged by encouraging inflation data and increasingly concerned about the health of the labor market.

European Central Bank policymakers did not see any urgency in cutting interest rates last month, but hinted at the possibility of a new debate in September, at a time when high interest rates are hurting growth, according to minutes of a meeting held on July 17-18.