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Three Fed officials all expressed "hawkishness": The pace of interest rate cuts still depends on the data!

2024-02-29

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Three Fed officials said on the same day that the pace of interest rate cuts will depend on upcoming economic data and suggested that the path of this rate cut may be different from previous interest rate cutting cycles.

Boston Fed President Susan Collins and New York Fed President John Williams said it might be appropriate for the Fed to cut interest rates for the first time "later this year," while Atlanta Fed President Raphael Bostic said, He currently expects the Fed to cut interest rates sometime this summer.

At the same time, they also provided some insight into how the Fed will evaluate the timing of future rate cuts.

Williams told reporters on Wednesday: "Regarding the rate cut and the pace, it has to be driven by economic conditions and inflation. It will not be based on calendar time, it will not be based on a specific fixed timetable, but will focus on the data."

Policymakers have repeatedly said in recent times that they want to see more evidence of steadily declining inflation before cutting interest rates, especially given the higher-than-expected consumer price index (CPI) released earlier this month. The above remarks further indicate that economic data is the main source of motivation to promote the pace of interest rate cuts.

"We've always said we're going to rely on data," Bostic said. "That data is going to be our guide to how much, how quickly and when we should really change our policies."

In the past, the Fed has typically lowered interest rates quickly, often in response to recessions. But this time, the economic fundamentals look very different. Despite rising borrowing costs, consumers continue to spend and the unemployment rate remains steady at a historically low 3.7%. This is almost the same as when the Fed starts raising interest rates in March 2022.

While several policymakers, including Bostic, have said they expect inflation to continue falling toward the central bank's 2% target, they do expect the ride to be bumpy.

Bostic said: "I still see some signs that this (inflation) is not going to get to 2% anytime soon. As long as we can get there, I'm willing to be patient."

Policy path

The Federal Reserve's next interest rate meeting will be held on March 19th and 20th, and it is expected to remain on hold. The market has now overturned expectations for the first interest rate cut in March, delaying it to June. Fed officials projected three rate cuts of 25 basis points in 2024 in a December dot plot. Williams said the estimate was still "reasonable."

Collins said: “It may be appropriate to begin easing policy later this year. When that happens, a methodical, forward-looking approach to gradually lowering interest rates should provide the necessary flexibility to manage risks while promoting Stable prices and maximum employment.”

She also said that further deceleration in inflation may require a further slowdown in economic activity.

"But there remains considerable uncertainty about when economic activity might slow, and by how much," she added.

Collins pointed to the fact that job growth remained strong in January and that the consumer price index for the month was "on the high side."

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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Three Fed officials all expressed "hawkishness": The pace of interest rate cuts still depends on the data!

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