Fed officials Loretta Mester and Mary Daley suggested Tuesday that three rate cuts by 2024 remain likely, with Mester hinting at the possibility of a June rate cut.
“I don't want to rule out that possibility,” Cleveland Fed President Mester said.
Mester noted that despite some higher-than-expected numbers in early 2024, the inflation situation “hasn't changed much.”
But she said she would like to see more data to find out whether these measurements were “a detour or a new kind of path.”
“If the economy progresses as expected, I think it would be appropriate for the FOMC to begin lowering the federal funds rate later this year,'' Mester said in a speech at the National Association for Business Economics in Cleveland. Stated.
San Francisco Fed President Daley also called three interest rate cuts in 2024 a “very reasonable standard,” but noted that “there is still work to be done.”
Mr. Mester and Mr. Daley became the latest Fed officials to commit to the number of rate cuts in 2024, but also made clear that the Fed is in no hurry to ease monetary policy.
Chicago Fed President Austan Goolsby also told Yahoo Finance late last month that three rate cuts in 2024 are “consistent with my thinking.”
A new inflation report released Friday showed the Federal Reserve's preferred inflation measure, the Personal Consumption Expenditure Index, has cooled slightly. This followed tougher readings in January and February by other indicators such as the Consumer Price Index.
Federal Reserve Chairman Jerome Powell said Friday that the new PCE report is “not as low as most of the good readings we had in the second half of last year, but it's certainly in line with what we expect going forward.” We firmly maintained our outlook. During a question-and-answer session at a San Francisco Fed meeting, he argued that inflation is still on a “bumpy road” toward the central bank's 2% goal.
Last month, the Federal Reserve decided to keep interest rates on hold and maintain the outlook for three rate cuts this year. Officials also raised their expectations for inflation and economic growth.
read more: Impact of Fed interest rate decisions on bank accounts, CDs, loans, and credit cards
Mester said his prediction for the number of rate cuts this year is in line with the median of three, and stands by what he told Yahoo Finance in an interview a little more than a month ago.
He added that the inflation situation “hasn't changed much since the beginning of the year, because we already thought that the pace of rise in inflation would slow this year.”
He does not expect to have enough information by the next policy meeting on May 1 to judge whether inflation is on a sustained downward trajectory to justify a rate cut. He said he had not.
Traders are betting that the next rate cut will come at the June meeting, but the chances of that happening are diminishing after strong February reports on manufacturing data and personal income and spending.
The probability of a June interest rate cut is currently about 58%.
Mester said the Fed could lower interest rates sooner if the job market worsens. But if inflation appears to be stagnant, the central bank may keep interest rates high for a longer period of time.
Mester has revised up his forecast for economic growth this year based on the latest economic data, but still expects growth to slow this year compared to last year's high pace.
He also predicted that the job market balance would continue to improve this year, with the unemployment rate rising slightly from its current low level.
Daly said inflation was actually falling, albeit in a “bumpy and slow” manner.
“There is no urgency to adjust interest rates,” he said. “Standing putt is the correct policy at the moment,” she added.
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