Source: Finance Association
Author: Niu Zhanlin
① If progress in inflation stagnates, there may be no need to cut interest rates this year;
② Barkin stressed that it is wise for the Federal Reserve to wait and see.
On Thursday EST, Minneapolis Federal Reserve Chairman Kashkari said that if progress in inflation stagnates, especially when the economy remains strong, there may be no need to cut interest rates this year.
In an interview on the same day, Kashkari stated, “In my March forecast, if inflation continues to fall back to the target level of 2%, interest rates will be cut twice this year. But if the inflation trend continues to move sideways, it will make me question whether we need to cut interest rates.”
Influenced by this hawkish signal, and traders remained cautious before the release of non-agricultural data, US stocks dived at the end of the session, and all three major stock indexes fell more than 1%.
Although Kashkari believes that the Federal Reserve will keep interest rates unchanged for a longer period of time, he also ruled out the possibility of raising interest rates.
He said the January and February inflation data was “a bit worrying” and said he needed to see more progress on prices to be convinced that inflation is moving towards the Fed's 2% target before considering cutting interest rates. He emphasized the importance of using inflation data to guide interest rate decisions.
Kashkari did not have the right to vote this year. At a meeting last month, he claimed that stronger economic data since the beginning of the year may cause the Federal Reserve to cut interest rates only twice this year, and maybe even once.
On the same day, a number of Federal Reserve officials also delivered speeches. Chicago Federal Reserve Chairman Goulsby said that the disappointing inflation data for January and February should not be viewed as “pure noise,” and that the biggest threat facing the inflation situation is continued high inflation in housing services.
He added that if real estate inflation does not fall, it will be very difficult to restore the inflation rate to 2%. But Goulsby declined to say when he thought he might start reducing borrowing costs.
Richmond Federal Reserve Chairman Barkin's statement is the same as Federal Reserve Chairman Powell's speech. He said that before starting to cut interest rates, policymakers will wait for more clear signs of falling inflation to appear, and he supports a cautious approach to cutting interest rates.
Barkin believes that this year's inflation data is not that satisfactory. Although this may be the result of weather or seasonal issues, it does raise the question of whether the inflation outlook has actually changed, or is it just a slight bump.
He stressed that it is wise for the Federal Reserve to wait and see. “No one wants inflation to happen again. Given the strong labor market, we have time to let the clouds of inflation dissipate before we start cutting interest rates.”
Editor/Jeffy