Gulspie: If inflation returns to 2%, the Fed still has room to cut interest rates this year.

Chicago Fed President Guilsby said on Monday that if inflation continues to fall towards the Federal Reserve's target of 2%, there is still room for further interest rate cuts this year, but the policy direction still needs more data to verify. Guilsby pointed out in an interview that current service sector inflation is still at a high level, which is a focus for policymakers. However, he also emphasized that if price increases related to tariffs are proven to be a one-time shock rather than sustained inflationary pressure, this will leave room for monetary policy adjustments. "I do believe that if these effects are ultimately proven to be temporary, and we can confirm that inflation is returning to the path to 2%, then there is still the possibility of several interest rate cuts in 2026," Guilsby said. "But the premise is that we must see relevant evidence." Looking back at recent policy backgrounds, Guilsby mentioned that Fed officials chose to keep interest rates unchanged at last month's meeting after three consecutive rate cuts in the last few months of 2025 to address signs of weakness in the job market. He further emphasized that whether to continue cutting interest rates in the future still depends on the trend of inflation. "I need to see more evidence to prove that we are steadily returning to the 2% inflation target," Guilsby said. "Once this is confirmed, I believe there is still room for interest rates to continue to be lowered." The market generally believes that Guilsby's latest statement releases a relatively mild policy signal, indicating that as long as inflation is no longer a sustained threat, the Fed remains open to further easing of monetary policy.