The Fed's top three leaders strongly support further rate cuts: preferring to protect jobs over inflation.

On October 9, New York Fed President John Williams, the third-ranking official of the Federal Reserve, said he supports further interest rate cuts this year, despite inflation having deviated from the Fed's 2% target in recent months. His rationale revolves around cracks in the labor market, which Williams hopes to prevent from deepening. In an interview with The New York Times on Wednesday, Williams said he doesn't believe the economy is on the brink of a recession. However, he noted that slowing monthly job growth and other signs that businesses are more hesitant to hire warrant attention. The Fed currently faces a dilemma. On the one hand, Fed officials don't want to exacerbate the labor market slowdown. But they also want to avoid inadvertently fueling inflation, as President Trump's tariffs have already caused it to accelerate again. Williams said the Fed has flexibility to support the labor market because the inflation outlook appears less dire than earlier this year. Williams said Trump's tariffs have indeed pushed up prices for some consumer goods, but he expects the impact on inflation to diminish over time, despite the new import taxes Trump has imposed on products such as furniture and pharmaceuticals. “The risk of a further slowdown in the labor market is something I’m very concerned about,” Williams said. He later added that if the economy develops as expected, with inflation rising to around 3% and the unemployment rate slightly above the current 4.3%, he would support “a rate cut this year, but we’ll have to see what that means.” Williams said that even if the government shutdown results in a lack of official data, he would not be deterred from taking action at the Fed’s upcoming meeting.