Source: Jin10 Data

The latest CPI data indicating soft inflation was seen as a positive sign by Cleveland Fed Chairman Mester. She hopes to see a few more months of good data before considering a rate cut, but it is important not to wait too long.

Mester said in an interview with CNBC on Friday, "I want to see a few more months of good inflation data: inflation is falling, short-term inflation expectations are starting to decline. You need to start thinking, 'Well, this might be the right set of data combinations, such as the labor market situation, inflation, to start cutting rates.'

After this week's FOMC meeting, Mester was the first Fed official to make a public speech. On Thursday, the Fed kept the key short-term interest rate at a 23-year high of 5.25%-5.5% because the US inflation recovery had not made progress before the epidemic.

Officials also lowered their expectations for how many times they plan to cut interest rates this year. According to their median forecast, they will only cut interest rates once this year. At the beginning of this year, many economists predicted that the Fed would cut interest rates at least three times this year.

Mester said the Fed will not wait until the inflation rate falls to 2% before cutting rates. She said, "It is inappropriate to keep interest rates at the current level until we reach 2%." She hinted that high interest rates could harm the economy.

Fed Chairman Powell made it clear that if inflation resumes its downward trend interrupted in the first four months of 2024, the Fed will cut rates more aggressively.

Mester will step down as Cleveland Fed Chairman at the end of this month, having held the position for 10 years. Her position will be taken over by former Goldman Sachs partner Beth Hammack, who will take office in August. At the FOMC meeting in July of this year, Chicago Fed President Charles Evans will briefly exercise the Cleveland Fed Chairman's voting rights.

Editor / jayden