Boston Fed President, Susan Collins, offered a cautionary stance on the current monetary policy trajectory in her latest remarks. Addressing the possibility of further rate hikes, Collins noted, “We may be near, we could even be at a place where we would hold” and not lift rates further.

While not ruling out the possibility of future hikes, Collins emphasized a measured approach, stating, “But certainly additional increments are possible, and we need to look holistically and be really patient right now and not try to get ahead of what the data will tell us as it unfolds.”

On the topic of inflation, Collins expressed her confidence in the Federal Reserve’s capabilities, saying she is “hopeful Fed can bring inflation back to 2% in a reasonable amount of time.”

However, she cautioned against making premature judgments about potential rate cuts, remarking it’s “premature to send a clear signal about the timing of rate cuts.”

Cleveland Fed President Loretta Mester said yesterday, “we’re at a point where we’re going to enter a restrictive stance of policy. At that point, I think it makes sense that we can slow down a bit the … pace of increases.”

“We’re still going to raise the funds rate, but we’re at a reasonable point now where we can be very deliberate in setting monetary policy,” she added.

“I think we can slow down from the 75 at the next meeting. I don’t have a problem with that, I do think that’s very appropriate,” Mester said. “But I do think we’re going to have to let the economy tell us going forward what pace we have to be at.”

“Right now my forecast is that we’re going to see some real, good progress on inflation next year,” Mester said. “We won’t be back to 2%, but we’ll see some meaningful progress next year. But if we don’t see that, then we’re going to have to make sure our policy really reacts to the incoming information. So I can’t tell you today what the path going forward will be.”

New York Fed President John Williams said yesterday, “Inflation is far too high, and persistently high inflation undermines the ability of our economy to perform at its full potential… There is still more work to do.”

“I do think we’re going to need to keep restrictive policy in place for some time; I would expect that to continue through at least next year,” he added.

Nevertheless, “at some point, nominal interest rates will need to come down. Otherwise real interest rates will be going up and that would just be tightening policy further and further in terms of its effects on the economy… I do see a point, probably in 2024, that we’ll start bringing down nominal interest rates because inflation is coming down and we would want to have real interest rates appropriately positioned.”

In a Financial Times interview, Cleveland Fed President Loretta Mester put emphasis on the duration of maintaining restrictive monetary policy to ensure that inflation reliably returns to the 2% target. That’s contrary to market expectations, which centers on timing and extent of rate cuts.

Mester’s key statement, “The next phase is not when to reduce rates… It’s about how long do we need monetary policy to remain restrictive in order to be assured that inflation is on that sustainable and timely path back to 2%,”

“The markets are a little bit ahead. They jumped to the end part, which is ‘We’re going to normalize quickly’, and I don’t see that,” she added.

When the discussion eventually shifts to the timing and pace of rate cuts, Mester highlighted the importance of one-year forward inflation expectations and their alignment towards the 2% target.

“If you don’t take action as expected inflation comes down, then you’re really firming policy,” she warned. “You don’t want to inadvertently become more restrictive than you think is appropriate.”

Fed kept monetary policy unchanged as expected. Federal funds rate is held at 0-0.25%. The target range will be maintained “until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.”

The asset purchase pace is also held at at least USD 80B on treasury securities and USD 40B on MBS per month. Though, it added that “if progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.”

Full statement here.