(Bloomberg) - Federal Reserve Bank of Cleveland President Loretta Mester suggested the central bank could be getting close to the level of confidence it needs to begin lowering interest rates in the next few months.
Mester is among more than a half-dozen Fed officials speaking Thursday in moderated discussions or speeches. Others included Minneapolis Fed chief Neel Kashkari and Chicago Fed President Austan Goolsbee.
The wave of commentary from officials follows remarks by Chair Jerome Powell just a day earlier. Powell emphasized the Fed has time to assess incoming data before reducing rates, signaling policymakers are willing to wait for more evidence of lower inflation to act.
It’s not yet clear whether the pickup in key price gauges at the start of 2024 is a temporary blip on the path to the central bank’s 2% inflation goal or a sign that progress has stalled.
In projections released after the Fed’s March meeting, officials penciled in three rate cuts this year — but just narrowly. Nine of 19 officials anticipate two or fewer reductions.
(All times are NY)
Mester Wants ‘Couple More Months Data’ Before First Cut (2:00 p.m.)
The Cleveland Fed chief suggested the central bank could be getting close to the level of confidence it needs to begin lowering interest rates in the next few months.
“I want to see a couple more months data” to discern whether the decline in US inflation will resume after a couple of disappointing months, Mester said in an online discussion hosted by the Global Interdependence Center. “I did anticipate that we’ll see inflation moving down and now we need to see more evidence that confirms that. And once I see that, then I think we’re in a position to move interest rates down.”
Now that inflation has fallen significantly over the last year, the Fed is in a better position to respond to an unexpected weakening in the labor market, Mester said.
“If it were to deteriorate significantly, we have policy position that we can address that and we can move rates down more swiftly and sooner than in our baseline forecast,” she said.
Kashkari Says Rate Cuts Depend on Inflation’s Progress (2:00 p.m.)
The Minneapolis Fed leader said interest-rate cuts may not be needed this year if progress on inflation stalls, especially if the economy remains robust.
“In March I had jotted down two rate cuts this year if inflation continues to fall back towards our 2% target,” Kashkari said in a virtual event with LinkedIn. “If we continue to see inflation moving sideways, then that would make me question whether we needed to do those rate cuts at all.”
He called the January and February inflation readings “a little bit concerning,” and said he needs to see more progress on prices to gain confidence that they’re moving toward the Fed’s 2% target before lowering borrowing costs. Kashkari is not a voting member of the Fed’s policy-setting committee this year.
Goolsbee Sees Inflation Still on Track To 2% Goal (1:10 p.m.)
Goolsbee, the Chicago Fed chief, said that higher-than-expected inflation readings in January and February likely don’t change the broader picture of cooling price growth.
“My overall assessment is that these two months should not knock us off the path back to target,” Goolsbee said in prepared remarks for an event in Oak Brook, Illinois. He added that economic activity right now does not resemble a traditional overheating of demand.
Goolsbee pointed to the role of cooling goods prices in lowering inflation, as supply chains improved during the pandemic recovery. Increasing labor supply will likely further ease services prices, he said, adding that housing inflation is now the most valuable indicator of the immediate future.
“Based on market data on rents for new leases, I have been expecting it to come down more quickly than it has,” Goolsbee said. “If it does not come down, we will have a very difficult time getting overall inflation back to the 2% target.”
Barkin Says Fed Has Time to Gain Clarity Before Cutting (12:10 p.m.)
Richmond Fed President Thomas Barkin said it’s “smart” for the central bank to take time to gain greater clarity about the inflation trajectory before lowering interest rates.
“No one wants inflation to reemerge,” Barkin said in prepared remarks to the Home Building Association of Richmond. “Given a strong labor market, we have time for the clouds to clear before beginning the process of toggling rates down.”
The Richmond Fed chief said he is confident that “all this tightening” will slow the economy further, adding that he wants to see cooling prices broaden to a greater share of goods and services.
“I am optimistic that keeping rates somewhat restrictive can bring inflation back to our target,” he said.
Harker Says Inflation Still Too High (10:00 a.m.)
Philadelphia Fed President Patrick Harker said inflation remains too high, even as the economy has been resilient and job growth remains strong.
“We’re not where we need to be,” the Philadelphia Fed chief said during a moderated discussion at the University of Pennsylvania’s Wharton business school. “Inflation is still too high, particularly for the ALICE communities — the asset-limited communities, and income constrained.”
Dudley Says Fed’s Long-Term Rate Outlook Too Low (8:30 a.m.)
Interest rates probably won’t fall as far as Fed officials currently expect over the next several years, former New York Fed President and Bloomberg Opinion columnist Bill Dudley said on Bloomberg Television.
The three rate cuts policymakers have penciled in for 2024 isn’t out of the realm of possibility, Dudley said. But higher inflation on average and a higher neutral interest rate — one that neither slows nor stimulates growth — means the federal funds rate will likely be above the 2.6% long-term rate Fed officials estimated in March, according to their median forecast. Markets, meanwhile, see rates settling nearly a percentage point higher than the Fed over the long run, he added.
“I think the market is right that the Fed is not going to go as far as the Fed is projecting,” Dudley said.
By Bloomberg News
April 4,2024
