Source: Finance Association

Although Federal Reserve Chairman Powell previously calmed market concerns about interest rate hikes, interest rate cuts during the year seem to be getting more and more “distant” as officials actively hawk. US Dallas Federal Reserve Chairman Lorie Logan (Lorie Logan) said on Friday that considering disappointing inflation data for the first few months of this year, it is still too early to consider investment in interest rate cuts.

She said at an event that the extent of policy restrictions is still uncertain. Given the high interest rates, the flexibility of the economy is surprising.

“It's still too early to consider cutting interest rates.” She said, “I need to see some of the uncertainties on our path resolved. We need to be very flexible about our policies, continue to pay attention to upcoming data, and observe how the financial situation evolves.”

Since the interest rate meeting in July last year, Federal Reserve officials have kept interest rates unchanged in the range of 5.25% to 5.5%. The much-anticipated “first drop in March” at the beginning of this year was also repeatedly postponed by continuing high inflation data, and interest rate cuts during the year were also drastically cut. Currently, the market generally expects that the first drop of the Federal Reserve will occur in September, and that interest rates will only be cut once during the year.

Federal Reserve Chairman Powell recently said that policymakers may keep interest rates high for some time, adding that he is unsure how long it will take him and his colleagues to gain confidence in cutting interest rates.

Logan said that in the face of higher interest rates, the strength of the economy may be due to the easing of supply chain issues during the pandemic or the beginning of the normalization of the labor market during the intense COVID-19 recovery period.

She said, “This may also be because the neutral interest rate level has actually risen. We are starting to accumulate evidence that may indicate that this level is higher than before.” The so-called neutral interest rate refers to the level of interest rates that neither stimulate the economy nor slow down the economy.

Officials sow hawks intensively

With the exception of Logan, the statements made by other officials were not optimistic. Earlier on Friday, Federal Reserve Governor Michelle Bowman (Michelle Bowman) said she doesn't expect interest rate cuts this year due to high inflation. Bowman was recently the first US Federal Reserve official to directly rule out the possibility of cutting interest rates this year.

“Currently, I have not included interest rate cuts in my 2024 economic forecast. I tend to maintain current interest rates for a longer period of time, which is still my basic assumption.” she said.

Furthermore, Boston Federal Reserve Chairman Susan Collins said on Wednesday that it will take longer than previously thought to reach the 2% inflation target, which also means that interest rates will need to stay at current levels longer.

She said, “There hasn't been much progress in fighting inflation in 2024, and recent data makes me believe it will take more time than previously anticipated. The recent unexpected rise in economic activity and inflation suggests that policies may need to be maintained at current levels until we have greater confidence that inflation will continue to move towards 2%.”

Minneapolis Federal Reserve Chairman Kashkari previously warned that current interest rates may not be enough to restore inflation to the target level of 2%. He said that policymakers are most likely to keep interest rates unchanged for a longer period of time; if inflation becomes entrenched, they may raise interest rates if necessary; they need to see multiple positive inflation data to help the Federal Reserve start cutting interest rates.

editor/tolk