Federal Reserve officials have suggested that a rate cut this week may conclude the first phase of a two-step approach to lowering rates.
In this initial phase, officials had set a low threshold for cuts, having previously maintained high borrowing costs for an extended period.
They awaited sufficient evidence that inflation was moving closer to their target.
Officials initiated rate cuts in September, making a notable half-point reduction followed by a quarter-point cut last month.
A cut this week would mark the third consecutive reduction.
Revised upwards
Over the past year, projections of the long-term rate have been gradually revised upwards, with further adjustments expected this week.
Some officials now emphasize the need for stronger signs of inflation improvement or labor market weakening before further cuts.
Cleveland Fed President Beth Hammack recently expressed concerns about the pace of cuts, referencing instances from the 1990s when the Fed paused after rapid rate reductions.
Recent communications from the Fed indicate a more cautious stance toward additional cuts.
Fed Chair Jerome Powell is encountering skepticism from colleagues regarding ongoing reductions.
The upcoming meeting may add to discussions about the “neutral” interest rate, the level at which economic activity is neither stimulated nor constrained.
