Fed officials want more evidence before considering rate cuts

A wave of comments from several Fed officials overnight highlighted a consensus on the need for patience before initiating interest rate reductions. While the higher than expected inflation readings in January and February were “concerning”, they’re not seen as derailing the broader disinflation process yet. Nevertheless, the sentiment is clear: more evidence is required to confirm inflation’s downward path towards 2% target before any policy easing is initiated.

Cleveland Fed President Loretta Mester emphasized the necessity of observing “a couple more months of data” to verify if the recent inflationary trends are indeed reversing. Mester pointed out the need for “more evidence” that supports the continuation of inflation’s decline. Meanwhile, Fed is in a “policy position” to adjust policy “more swiftly and sooner” if labor markets were to “deteriorate significantly”

Minneapolis Fed President Neel Kashkari on penciled in two “rate cuts” this year back in March, predicated on inflation’s decline towards target.” Yet, if inflation is “moving sideways”, he would question “whether we needed to do those rate cuts at all.”

Chicago Fed President Austan Goolsbee said the inflation in the first two months of the year “should not knock us off the path back to target”. He views housing inflation as the “most valuable indicator” now. “If it does not come down, we will have a very difficult time getting overall inflation back to the 2% target.”

Richmond Fed President Thomas Barkin emphasized the strategic patience afforded by a “strong labor market,” suggesting that Fed has the time needed for the economic “clouds to clear” before commencing with rate adjustments.