After the Federal Reserve continued to hold steady and lower its expected interest rate cuts for the year last week, Fed officials began to speak intensively on Tuesday. New York Fed President Williams, Richmond Fed President Barkin and Boston Fed President Collins all said that although the fight against inflation has achieved results, future rate cuts must be based on economic data and require more patience. Fed official Kugler said that if the economic situation develops as she expects, it may be appropriate to lower interest rates later this year.

New York Fed President: Expected inflationary pressure will continue to weaken

John Williams, FOMC permanent voters, the Fed's "three hands," and New York Fed President John Williams said on Tuesday that the U.S. economy is moving in the right direction but has not stated when it will support a rate cut. He emphasized that any decision this year on the timing or degree of a rate cut will depend on the economic data that will be released soon. He said recent inflation data was encouraging and expects the price pressure to continue to ease.

"There are very good signs of supply and demand balance. I can indeed see the process of going against inflation continuing. I expect inflation to continue to decline in the second half of this year and next year. "

Williams also said that while economic data is generally good, recruitment has slowed somewhat. Previously collected data revealed evidence of weakened employment in households, but employment data in business surveys was still very strong. In response to this, he said that wage reports "may have been overstated a bit." He said that the Federal Reserve will learn more about related information in the coming months.

According to the forecast released last week, Federal Reserve officials lowered their expectations for planned interest rate cuts this year, with the median official forecasting only one rate cut.

Last month, Williams stated that there was "sufficient evidence" that the Federal Reserve's current policy settings are affecting the economy, and he expects inflation to continue to cool in the second half of this year. When asked whether the question of interest rate cuts in the fall involved political factors, Williams emphasized the need to ignore political factors and said that "the most important thing is to make the right decisions."

Richmond Fed President: Inflation has reached the end, but it is difficult to return to the right track.

Thomas Barkin, the president of the Federal Reserve Bank of Richmond, who has voting rights this year, stated on Tuesday that he would not consider changing rates until he sees inflation continue to fall to the Fed's annual target of 2%. He also said that it may be reasonable for the Federal Reserve to remain unchanged after one future interest rate cut.

Barkin pointed out that inflation in the service-based inflation index is still stubborn, while commodity prices have cooled. In addition, housing and living inflation are also stubborn. At the same time, data on the job market are healthy, but there are also some worrisome signs.

Like Williams, Barkin also believes that inflation is improving, which he attributed to the effectiveness of restrictive monetary policy and the normalization of supply chains. He said that the May CPI report was very encouraging.

"We are obviously at the end of inflation, but the question is, 'Have we completely returned to the right track?' I think it is difficult to judge how much signal should be taken from data from the second half of last year, the first quarter of this year, or the past few weeks. "

Barkin refused to give specific numerical levels of inflation in monthly data and pointed out that he needed to see "sustainability and breadth" of the slowdown in inflation.

"Sustainability means that overall inflation continues to run along a path that is believed to be moving toward 2%, and breadth means that going against inflation appears throughout the entire basket of goods, not just driven by a small part. "

As the Federal Reserve's preferred indicator of inflation, the Personal Consumption Expenditures Price Index in April showed that more than half of the categories in the basket rose by more than 3% year-on-year. This is about twice the average level before the pandemic. For Barkin, such a slowdown in inflation is not yet widespread enough.

Fed official Kugler: If the economy develops as expected, it will be appropriate to cut rates later this year.

Although inflation is still high, Fed official Adriana Kugler said on Tuesday that recent data has made her cautiously optimistic, believing that the Fed is on the right track and making progress toward its 2% inflation target. If the economic situation develops as she expects, it may be appropriate to lower interest rates later this year.

After inflation rebounded in the first quarter, Kugler said the latest information on economic activity, labor markets and inflation showed "new progress." In particular, the May CPI data was good. She added that further progress may be "gradual," but she remains optimistic that supply improvements and cooling demand will support continued inflation easing.

"I believe that the current monetary policy stance is sufficiently tight to help cool the economy and bring inflation back to 2%, without causing a sharp contraction in economic activity or a significant deterioration in labor markets."

Boston Fed President: Interest rate cuts should be patient.

Boston Fed President Susan Collins said on Tuesday that while recent inflation data is encouraging, the Fed should be patient when considering when to lower interest rates.

"It is still too early to determine whether inflation has returned to the target level of 2% persistently, and we should not overreact to good news for one or two months. Adjusting monetary policy appropriately still requires patience."

"In my opinion, the data shows that supply and demand are balancing better, which is necessary to restore price stability," Collins said. "However, this process may take longer than previously expected."

Editor/Somer