US Federal Reserve policymakers expressed on Tuesday that the central bank should hold off on cutting interest rates for several months to ensure that inflation reaches its 2% target.
"In the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy," Fed Governor Christopher Waller stated at the Peterson Institute for International Economics in Washington.
This viewpoint was reiterated by Cleveland Fed President Loretta J. Mester, who mentioned Tuesday night at the Fed's Atlanta conference: "I need to see a few more months of inflation data that looks like it is coming down," said Mester, who will attend her last Fed meeting in June before retiring.
Boston Fed President Susan Collins emphasized the importance of being patient, stating that she believed the data had been very mixed and that it would take longer than she had previously anticipated.
Policymakers spoke as discussions of further rate hikes waned while emphasizing the necessity of further cooling the economy.
Waller expressed concern about avoiding a sudden downturn, emphasizing its critical importance. He remarked that currently, there were no indications that remaining in the current situation for three or four months would lead to an economic crisis. His colleagues reiterated this view, emphasizing the low level of risk linked to maintaining the current policy.
The Fed has maintained its benchmark rate at 5.25%-5.50% since last July, responding cautiously to three months of higher-than-expected inflation from January to March. They are encouraged by recent signs of weakening inflation but believe further progress is necessary to bring inflation down to the target level of 2%.
These comments have heightened market expectations for a Fed rate cut, with traders anticipating the first cut in borrowing costs in September and a second at the final policy meeting in December.
Atlanta Fed President Raphael Bostic echoed Waller's sentiments, stressing the importance of caution in approving the first rate cut to avoid negative impacts on business and household spending and prevent inflation from accelerating again.
"It is in our interest to not start bouncing around. ... For me, I'd rather wait longer to make sure that doesn't happen," Bostic told reporters on the sidelines of the Atlanta Fed conference in Florida. He mentioned that he still expects inflation to edge lower throughout the year, with a single rate cut being appropriate in the fourth quarter.
Bostic stated that he was not in a hurry to cut rates. He emphasized the need to ensure that when they begin to cut rates, it is clear that inflation will reach 2%. He noted that the potential for exuberance requires them to be very cautious about the timing of the first move, which might need to happen later.
At a separate event at the Dallas Fed, Fed Deputy Chairman for Supervision Michael Barr emphasized that strong inflation figures in the first quarter did not increase his confidence that price pressures will ease.
He mentioned that, for him at least, this meant they needed to remain in their current position for longer than previously thought. He added that more evidence of continued progress on inflation was needed before they could consider adjusting the policy rate.
The policymakers' comments came a day before the publication of the minutes from the US central bank meeting held April 30-May 1. Cutting rates will require more time and confidence in a sustained decline in inflation, Fed Chairman Jerome Powell stated.
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