Fed policymakers, encouraged by recent statistics, are carefully moving towards what most anticipate would be one or more interest rate cuts by the end of this year. They are waiting for more evidence that inflation is slowing down as well as any red flags from a robust labour market.
Fed Governor Adriana Kugler stated on Tuesday that she thinks monetary policy is "sufficiently restrictive" to ease price pressures without significantly worsening the job market. Kugler outlined a number of reasons for optimism that inflation is back on track to the U.S. central bank's 2% goal after stalling earlier this year.
"If the economy evolves as I am expecting, it will likely become appropriate to begin easing policy sometime later this year," she told the Peterson Institute for International Economics in Washington. The latest data, including a government report showing consumer prices did not rise at all from April to May, is "encouraging," she said.
Kugler stated, "I think the economic conditions are moving in the right direction," even if more development is still needed.
Following stronger-than-expected inflation data in the first few months of 2024, the Fed last week maintained its benchmark interest rate in the range of 5.25% to 5.50% and released revised economic projections that revealed its officials had scaled back their expectations for rate cuts this year to one from three seen in March.
Since Fed Chair Jerome Powell stated that the first rate cut will be "consequential" and potentially reset market expectations, most analysts associate fewer rate cuts with a later start to them.
The president of the Chicago Fed, Austan Goolsbee, praised the most recent inflation figures, saying, "Hopefully, we'll see more like that."
Goolsbee noted that last year's "magic" combination of a spike in the supply of products and labour allowed inflation to decline rapidly without increasing unemployment. This year, he suggested, it may still work.
A little more dubious tone was adopted by other Fed executives.
Texas Fed President Lorie Logan stated, "We're in a good position, we're in a flexible position to watch the data and to be patient," during a gathering in Austin. Though "welcome news," recent data indicating a lowering of inflation indicates that "several more months of that data are needed to really have confidence in our outlook that we're heading to 2%."
In his first statement on monetary policy since taking the helm at the local Fed bank, St. Louis Fed President Alberto Musalem hinted at the possibility of a longer runway ahead.
"I will need to observe a period of favorable inflation, moderating demand and expanding supply before becoming confident that a reduction in the target range for the federal funds rate is appropriate. These conditions could take months, and more likely quarters to play out," Musalem told the CFA Society St. Louis.
Speaking on Tuesday, all Fed officials emphasised the Fed's commitment to basing decisions on newly available economic data.
President of the New York Fed John Williams stated, "I expect interest rates to come down gradually over the next couple of years, reflecting the fact that inflation is coming back to our 2% target and the economy is moving in a very strong sustainable path," during a Fox Business television channel interview.
Like the majority of Fed officials recently, he failed to provide a precise timeline for when that would happen. The first rate decrease is now priced in by financial markets for September, and a second one is anticipated for December.
"I won't make any predictions" on the precise course of policy. The course of events "depends on how the data evolves," he stated. "I believe that things are heading towards an eventual improvement."
Susan Collins, President of the Boston Fed, issued a warning against overreacting to "promising" economic data.
Collins said to a gathering in Lawrence, Massachusetts, "It is too early to determine whether inflation is durably on a path back to the 2% target." "The appropriate approach to monetary policy continues to require patience, providing time for a methodical and holistic assessment of the evolving constellation of available data."
Thomas Barkin, President of the Richmond Fed, believes that continually easing pricing pressures in both commodities and services will be crucial.
In a webcast interview, Barkin told MNI, "We are clearly on the back side of inflation." He also referred to recent statistics that showed consumer prices did not increase at all from April to May as "encouraging." However, he stated that the uncertain policy trajectory that has emerged since last year is due to the choppy data.
"We will learn a lot more over the next several months and I think we are well positioned from a policy standpoint to react," he stated.
Tuesday's economic crosscurrents—the central bank reporting a spike in industrial production and the U.S. Commerce Department reporting a smaller-than-expected gain in retail sales in May—could force the Fed to intervene sooner rather than later.
"Making sure that we get inflation back to 2% is the Fed's job number one," Williams stated.
(Source:www.businesstimes.com.sg)
Fed Governor Adriana Kugler stated on Tuesday that she thinks monetary policy is "sufficiently restrictive" to ease price pressures without significantly worsening the job market. Kugler outlined a number of reasons for optimism that inflation is back on track to the U.S. central bank's 2% goal after stalling earlier this year.
"If the economy evolves as I am expecting, it will likely become appropriate to begin easing policy sometime later this year," she told the Peterson Institute for International Economics in Washington. The latest data, including a government report showing consumer prices did not rise at all from April to May, is "encouraging," she said.
Kugler stated, "I think the economic conditions are moving in the right direction," even if more development is still needed.
Following stronger-than-expected inflation data in the first few months of 2024, the Fed last week maintained its benchmark interest rate in the range of 5.25% to 5.50% and released revised economic projections that revealed its officials had scaled back their expectations for rate cuts this year to one from three seen in March.
Since Fed Chair Jerome Powell stated that the first rate cut will be "consequential" and potentially reset market expectations, most analysts associate fewer rate cuts with a later start to them.
The president of the Chicago Fed, Austan Goolsbee, praised the most recent inflation figures, saying, "Hopefully, we'll see more like that."
Goolsbee noted that last year's "magic" combination of a spike in the supply of products and labour allowed inflation to decline rapidly without increasing unemployment. This year, he suggested, it may still work.
A little more dubious tone was adopted by other Fed executives.
Texas Fed President Lorie Logan stated, "We're in a good position, we're in a flexible position to watch the data and to be patient," during a gathering in Austin. Though "welcome news," recent data indicating a lowering of inflation indicates that "several more months of that data are needed to really have confidence in our outlook that we're heading to 2%."
In his first statement on monetary policy since taking the helm at the local Fed bank, St. Louis Fed President Alberto Musalem hinted at the possibility of a longer runway ahead.
"I will need to observe a period of favorable inflation, moderating demand and expanding supply before becoming confident that a reduction in the target range for the federal funds rate is appropriate. These conditions could take months, and more likely quarters to play out," Musalem told the CFA Society St. Louis.
Speaking on Tuesday, all Fed officials emphasised the Fed's commitment to basing decisions on newly available economic data.
President of the New York Fed John Williams stated, "I expect interest rates to come down gradually over the next couple of years, reflecting the fact that inflation is coming back to our 2% target and the economy is moving in a very strong sustainable path," during a Fox Business television channel interview.
Like the majority of Fed officials recently, he failed to provide a precise timeline for when that would happen. The first rate decrease is now priced in by financial markets for September, and a second one is anticipated for December.
"I won't make any predictions" on the precise course of policy. The course of events "depends on how the data evolves," he stated. "I believe that things are heading towards an eventual improvement."
Susan Collins, President of the Boston Fed, issued a warning against overreacting to "promising" economic data.
Collins said to a gathering in Lawrence, Massachusetts, "It is too early to determine whether inflation is durably on a path back to the 2% target." "The appropriate approach to monetary policy continues to require patience, providing time for a methodical and holistic assessment of the evolving constellation of available data."
Thomas Barkin, President of the Richmond Fed, believes that continually easing pricing pressures in both commodities and services will be crucial.
In a webcast interview, Barkin told MNI, "We are clearly on the back side of inflation." He also referred to recent statistics that showed consumer prices did not increase at all from April to May as "encouraging." However, he stated that the uncertain policy trajectory that has emerged since last year is due to the choppy data.
"We will learn a lot more over the next several months and I think we are well positioned from a policy standpoint to react," he stated.
Tuesday's economic crosscurrents—the central bank reporting a spike in industrial production and the U.S. Commerce Department reporting a smaller-than-expected gain in retail sales in May—could force the Fed to intervene sooner rather than later.
"Making sure that we get inflation back to 2% is the Fed's job number one," Williams stated.
(Source:www.businesstimes.com.sg)
