2025 FOMC voting member and St. Louis Fed President Moussailem stated Wednesday that in light of inflation being higher than expected and concerns about the labor market easing, it may be time for policymakers to slow the pace of interest rate cuts.

Moussailem stated that it may be appropriate to continue lowering interest rates over time, but he supports a patient approach, saying the risks of lowering rates too quickly outweigh the risks of lowering them too little.

"Keeping options for monetary policy open seems important, and the timing to slow or pause interest rate cuts may be approaching, in order to carefully assess the current economic environment, the information received, and the changing outlook," Moussailem said Wednesday in a speech prepared for a seminar by Bloomberg and the Global Interdependence Center in New York.

Moussailem also reiterated that the Fed is close to achieving its employment and price stability goals and that monetary policy is in a favorable position.

Moussailem stated that given the current 'strong' economy's inflation levels and the labor market reaching full capacity, a patient monetary policy stance is appropriate.

He expects economic growth to slow, approaching potential growth rates, with further cooling in the labor market and a slowdown in wage growth. "I expect the labor market to remain at full employment while the unemployment rate will rise slightly, nearing its natural level," he added.

Since September, Fed officials have cut interest rates by 75 basis points. Some officials have called for caution in rate cuts amid fluctuating inflation data and a robust labor market. Officials will hold their next meeting from December 17 to 18.

The St. Louis Fed President indicated that he expects inflation to converge toward the Fed's 2% target over the next two years. Nevertheless, he added that data released since September suggests an increased risk that the anti-inflation process could 'stall or reverse.'

Moreover, he stated that policymakers should exercise caution, as it is currently unclear where the neutral interest rate lies, which neither stimulates nor slows down growth. He also indicated that it is still uncertain whether productivity growth will be sustained.

Policymakers will have more economic data to review before the next meeting, including the new employment report due on Friday.

Article forwarded from: Jinshi Data