The latest remarks from the Federal Reserve, including those from Cally, are quite interesting. He is essentially hinting that the policy space has not been completely closed. The Fed official said that, given the current complex situation, they need to take a more flexible approach toward the future of interest-rate policy and cannot completely rule out the possibility of further adjustments.

The core issue is still the uncertainty around inflation. Cally noted that the longer a geopolitical conflict lasts, the greater the inflationary pressure will be. Even if the conflict ends completely now, the recovery of supply chains is not something that can happen overnight; it will take several months to stabilize truly. This means that, in the short term, inflation risk will not disappear immediately.

What’s notable is that he expressed considerable concern about the downside risks currently facing the outlook. The Fed is in a somewhat awkward position: on one hand, it must deal with uncertainty surrounding inflation, and on the other, it must also stay vigilant about the risk that the economy could fall into recession. This kind of dilemma makes policy-making more complex.

Also worth noting is that Cally said he is looking forward to the Wosh nominee who is set to join the Federal Reserve, and he is open to some of the policy concerns Wosh previously raised. This suggests that new voices may be added within the Fed on certain policy judgments, and the overall decision-making framework could face changes. Overall, the Fed’s current stance is to maintain flexibility in policy rather than lock itself into a fixed direction.