While the market is still debating how many more rate cuts can happen this year, officials from the Federal Reserve across the ocean collectively poured a bucket of cold water. On February 24, several senior officials from the Federal Reserve spoke intensively, and their core logic was surprisingly consistent: inflation has not yet rolled back to the "home" of 2%, and it is too early to discuss further rate cuts. From Boston to Chicago, from Richmond to Atlanta, “patience” and “observation” have become the new keywords in this policy discussion.

1. Collins: Interest rates will likely "pause," policy is nearing neutrality

● Boston Federal Reserve President Susan Collins gave a quite straightforward judgment during a panel discussion in her home turf. She stated that, given the recent resilience exhibited by the labor market—not weakness, but an “unusually stable” state—the current level of interest rates will likely need to be “maintained for a period of time.”

● Collins performed a “checkup” on the current monetary policy: after a cumulative easing of 175 basis points in the past year and a half, the current interest rate is simply “mildly restrictive” and may already be quite close to that “neutral level” which neither accelerates nor brakes. Since the car has slid onto a flat road, the driver naturally does not need to hurry to accelerate.

● “We need more evidence that inflation is steadily returning to the 2% target.” Collins acknowledged that while the baseline view is still that inflation will fall later this year, the best choice before seeing conclusive data is to keep the foot on the brake and continue to observe.

2. Goolsbee: 3% inflation is not safe; don't rush in

● Compared to Collins' moderation, Chicago Federal Reserve President Austan Goolsbee's statements are sharper. He pointed out directly at a meeting of the National Association for Business Economics: it is not appropriate to further cut rates before more evidence shows that inflation is continuously cooling.

● Goolsbee calculated for the market: although inflation has dropped from its peak, the December PCE inflation still lingered at 2.9%, and the core PCE remained at 3%. He used a vivid warning—“staying at 3% inflation is not a safe position.” This is akin to a fever dropping from 39 degrees to 37.5 degrees, although it feels a bit more comfortable, it is still some distance from the normal 36.5 degrees, thus one cannot hastily stop medication.

● He even reiterated the past lessons of “misjudging inflation as merely transient,” implying that decision-makers cannot stumble twice in the same pit. Regarding whether there can be rate cuts this year, Goolsbee still retains the possibility, but he passed the ball back to the data: “If price pressures ease, there could indeed be multiple rate cuts in 2026, but that depends on whether inflation is truly on the path back to 2%.”

3. Barkin's balancing act: Employment and inflation, both hands must be strong

● Richmond Federal Reserve President Tom Barkin discussed more about the subtle balance of the Federal Reserve's “dual mandate.” He pointed out that although the downside risks of the labor market have decreased, inflation data remains “stubbornly above target.”

● “No one wants inflation to stagnate, and no one wants the labor market to weaken further,” Barkin summarized the current dilemma with this sentence. The good news is that he believes the Federal Reserve is currently “in a favorable position,” with enough space to observe the economic direction without rushing to make directional choices.

4. Market response: Rate cut expectations retreat, the dollar rises

● This series of somewhat “hawkish” statements rapidly stirred ripples in the foreign exchange and precious metals markets. Bond Asia's analysis pointed out that the Federal Reserve officials' remarks significantly cooled market rate cut expectations and provided rebound momentum for the US dollar index. Recent data shows that the probability of the Federal Reserve maintaining interest rates unchanged until March has reached as high as 98%, while the market’s expectation for a rate cut in June has also retreated from above 50% to around 44%.

● At the same time, spot gold fell back below $5100 per ounce after a brief spike, showing the market's re-pricing for a high interest rate environment.

5. Unique perspective: Is AI a friend or foe?

● It is worth noting that in this discussion about inflation, a “new variable” has quietly emerged—artificial intelligence. Collins rarely shifted her gaze towards technological changes during her speech. She stated that she is closely monitoring whether “high productivity helps reduce inflation.”

● She revealed that current corporate feedback shows that the primary role of artificial intelligence is to “enhance work efficiency rather than replace workers.” If AI can help companies increase output without significantly raising labor costs, it may alleviate price pressures from the supply side and become a “savior” to help inflation return to 2%. However, there are also concerns that the data center construction and energy demand triggered by AI may also become a new driver of inflation.

● In addition, Atlanta Federal Reserve President Bostic raised another deep thought: the unemployment rate may be heading towards a higher “new normal.” If the crux of the labor market is a skills mismatch rather than cyclical job losses, then blindly cutting rates may not only fail to save employment but may also reignite inflation.

● In summary, this round of “hawkish tones” from the Federal Reserve is not to completely shut the door on rate cuts, but rather to temper the overly heated market expectations. Until the “monster” of inflation is fully caged, the “patience” of monetary policy will be a theme running through the spring of 2026. For investors, rather than guessing the timing of the next rate cut, it is better to closely monitor each subsequent inflation and employment report—after all, the data is the only action guide for the Federal Reserve right now.

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