Source: Wall Street News

On Tuesday, two Fed voting commissioners Mester and Daly shared the same view. They still expect the Fed to cut interest rates three times in 2024, but since economic growth is still strong, they are currently in no hurry to cut interest rates, and there is a risk of cutting interest rates too soon.

Furthermore, Meester also emphasized that it is impossible to cut interest rates until May. Daly suggested that if inflation continues to exceed expectations, they may consider reducing interest rate cuts.

Meester: It is impossible to cut interest rates until May; we will consider it later this year

Overnight on Tuesday, April 2, the Federal Reserve Board and Cleveland Federal Reserve Bank Governor Loretta Mester (Loretta Mester) delivered a speech on the outlook for the US economy. She said that whether to cut interest rates depends on future inflation data, but she is convinced that the inflation rate will continue to slowly fall towards the 2% target:

Although the inflation rate at the beginning of the year was higher than expected, these figures are generally in line with my expectations, that is, the rate of price increase is slowing down.

I remain convinced that the inflation rate will continue to slowly fall towards the 2% target set by the Federal Reserve, although the rate of decline may be slower than last year.

Before considering cutting interest rates, I'd like to see more evidence that inflation trends are declining. I need to see more data to boost my confidence, and future monthly inflation reports will help me better judge whether the downward trend in inflation is slowing down.

The long-term federal funds rate is now expected to be 3% instead of 2.5% previously.

I don't think the neutral interest rate will be as low as it used to be.

Meester said that given the current strong economy, there is currently no rush to cut interest rates, but it is expected that interest rates will be cut three times later this year:

It is expected that at the April 30-May 1 meeting of the US Federal Reserve, there was insufficient evidence to support interest rate cuts. However, the possibility of cutting interest rates at the June meeting is not ruled out.

The inflation rate in 2024 will be higher than the median expectations of Federal Reserve officials.

Interest rates will be cut three times later this year, but this decision is very delicate, and it remains to be seen whether the number of interest rate cuts needs to be reduced.

Furthermore, Meester also emphasized that in the current situation where the economy and the job market are performing well, there is a risk of cutting interest rates too soon:

The Federal Reserve's dual goals of maximum employment and price stability are being better balanced.

If the labor market deteriorates, policymakers may cut interest rates sooner than expected. If progress in inflation comes to a standstill, they may maintain current policies or even higher interest rates.

At this point, I think the greater risk is to start cutting interest rates too soon. Given the steady performance of both the labour market and economic growth, there is currently no need to take this risk.

Meester is 65 years old and has reached the legal retirement age for Reserve Bank Governor, so she will step down in June. Her upcoming departure also means that a new official will take her place, which may have a certain impact on the Federal Reserve's policy direction.

Daly: If inflation continues to exceed expectations, they may consider reducing interest rate cuts

Meanwhile, on Tuesday, April 2, the Federal Reserve Board and San Francisco Federal Reserve President Mary Daly (Mary Daly) mentioned at an event in Nevada that if inflation continues beyond expectations, we need to be prepared and may consider reducing interest rate cuts:

The forecast of three interest rate cuts proposed by the Federal Reserve's March FOMC meeting is reasonable; cutting interest rates three times is a prediction, not a promise.

Economic growth is still strong, and there is currently no rush to cut interest rates. There is a risk of cutting interest rates too soon; it is correct to maintain the current policy for now.

If inflation lasts longer than we expected, we must be prepared and may consider cutting interest rates less.

The possibility of a recession is currently low.

Our jobs exceed the labor supply, and the labor market is performing well. The hope is to reduce the inflation rate to 2% while avoiding unnecessary harm to the labor market.

Editor/jayden