Fed Christopher Waller said in a speech that while some believe that inflation will come down quite quickly this year, “I’m not seeing signals of this quick decline in the economic data”.

“I am prepared for a longer fight to get inflation down to our target,” he added.

“Though we have made progress reducing inflation, I want to be clear today that the job is not done,” Waller said.

“It might be a long fight, with interest rates higher for longer than some are currently expecting. But I will not hesitate to do what is needed to get my job done.”

Full speech here.

Atlanta Fed President Raphael Bostic emphasized the necessity of seeing “more progress” on inflation reduction before considering any rate cuts. He said overnight that the prosperity in the labor market and the economy, granting the FOMC the “luxury of making policy without the pressure of urgency.”

In terms of the pace of policy loosening once initiated, Bostic envisages a measured approach rather than “back to back” adjustments. The reaction of market participants, business leaders, and households to policy changes will critically influence the pace of rate cuts.

Highlighting ongoing inflation concerns, Bostic pointed out the continued price increases in a significant portion of goods and services at rates exceeding 5% annually. Moreover, a Dallas Fed measure indicated that underlying inflation remains slightly above Fed’s target at 2.6%, further complicating the path towards rate normalization.

Bostic also reflected on the feedback from business executives, noting a widespread strategy of holding back investments and hiring until more favorable conditions emerge. He warned of the “pent-up exuberance” that could result from a large-scale unleashing of this dormant capacity, introducing a new variable of upside risk to the economy.

Richmond Fed President Tom Barkin told the Financial Times he would not “prejudge” the rate decision at the December meeting. He acknowledged the dual challenges of elevated inflation and labor market strains.

“If you’ve got inflation staying above our target, that makes the case to be careful about reducing rates,” he said. “If you’ve got unemployment accelerating, that makes the case to be more forward-leaning.”

Barkin emphasized growing vulnerability to cost shocks which he said was higher than it might have been five years ago. He also pointed to business concerns over potential inflationary pressures stemming from President-elect Donald Trump’s proposed tariffs and deportation policies

However, he added that Trump’s plans to boost domestic energy production could have a counteracting “disinflationary” effect.

While businesses are apprehensive about economic policy changes under the new administration, Barkin underscored that the Fed would not preemptively adjust its policy.

“We shouldn’t try to solve it before it happens,” he remarked.

In the minutes of the December FOMC meeting, the participants agreed that inflation was “unacceptably high”. They “concurred” that inflation data showed “welcome reductions in the monthly pace of price increases”, but “stressed that it would take substantially more evidence of progress to be confident that inflation was on a sustained downward path.”

Also, participants noted that risk to inflation outlook remained “tilted to the upside”, with possibility of “more persistent than anticipate” price pressures. Meanwhile, risks to economic activity outlook were “weighted to the downside”.

Participants continued to anticipate that “ongoing increases in the target range for the federal funds rate would be appropriate”. “No participant” anticipated that it’s appropriate to start lowering rates in 2023. They generally observed that a “restrictive policy stance would need to be maintained” for some time. Also, “several participants commented that historical experience cautioned against prematurely loosening monetary policy.”

Full minutes here.

Richmond Fed President Thomas Barkin expressed a cautious stance on the prospect of Fed starting to cut interest rates in the near future, citing ongoing inflation pressures as a primary concern.

In an interview with CNBC, Barkin emphasized the need for inflation to normalize before considering adjustments to the interest rate policy. “I’m still hopeful inflation is going to come down and if inflation normalizes then it makes the case for why you want to normalize rates, but to me it starts with inflation,” Barkin stated

Barkin highlighted continued wage and inflation pressures, referencing a recent report indicating high inflation levels. While he noted some stabilization in goods inflation, Barkin pointed out that inflation in the services sector remains a challenge.

“I still see wage pressures, I still see inflation pressures…we just had a high inflation report yesterday… On the goods side inflation is settling. On the services side, not so much,” he elaborated.

Cleveland Fed President Loretta Mester said in a speech that she will be monitoring incoming data to determine if her baseline outlook of sustainable-growth remains intact. And for now, it’s “too soon” to make that determination. Hence, she said, “I prefer to gather more information before considering a change in our monetary policy stance.”

To be more specific, Mester added, “if I see a few weak job reports, further declines in manufacturing activity, indicators pointing to weaker business investment and consumption, and declines in readings of longer-term inflation expectations, I would view this as evidence that the base case is shifting to the weak-growth scenario. In this scenario, the economy’s short- to medium-term equilibrium interest rate would be moving down, and our policy rate could need to move down ”

Mester’s full speech here.

Philadelphia Fed President, Patrick Harker, shared his insights on the current stance of Fed’s monetary policy. Addressing the topic of monetary tightening, Harker said, “Right now, I think that we’ve probably done enough because we have two things going on.”

Elaborating further, Harker mentioned the twin pillars that have influenced his perspective: “The Fed funds rate increases — they are at a restrictive level, so let’s keep them there for a while. And also we are continuing to shrink our balance sheet that is also removing accommodation.”

Looking to the future, Harker emphasized a data-driven approach, noting, “I see us staying steady throughout the rest of this year, next year is data driven.” When prompted about the potential timing of a rate cut, he candidly stated, “Can’t predict when Fed will cut rates.”