Federal Reserve officials have recently expressed different attitudes towards whether there will be interest rate cuts this year. Officials such as Michelle Bowman, a board member, and Lorie Logan, president of the Dallas Federal Reserve, believe that interest rate cuts are not appropriate this year, citing the continuous presence of inflation in the early months of this year. However, Raphael Bostic, president of the Atlanta Federal Reserve, stated that even if inflation continues to decline at a slow pace, there may still be interest rate cuts this year.
During the Federal Reserve’s interest rate decision on the 3rd, it was decided to maintain the federal benchmark interest rate in the range of 5.25% to 5.5% for the 6th consecutive time, in order to counter persistent inflationary pressures. Federal Reserve Chairman Powell admitted after the meeting that the time for officials to gain confidence in interest rate cuts would be longer than originally expected, but he also released a dovish signal to reassure the market, stating that the central bank’s next move is unlikely to be an interest rate hike.
Regarding whether there will be interest rate cuts this year, Federal Reserve officials have expressed different attitudes recently. Michelle Bowman, a board member of the Federal Reserve, stated in an interview with Bloomberg on the 10th that she believes interest rate cuts are not appropriate this year, pointing out the ongoing presence of inflation in the early months of this year.
Lorie Logan, president of the Dallas Federal Reserve, responded to calls for long-term high interest rates. She stated in a speech on Friday that considering the disappointing inflation data so far this year, it is still too early to consider interest rate cuts.
However, according to a Reuters report, Raphael Bostic, president of the Atlanta Federal Reserve, stated that even though the timing and extent of loose monetary policy are uncertain and the pace of inflation decline is slow, the US central bank may still cut interest rates this year.
Bostic explained that most employers expect their wage growth to return to pre-pandemic levels, which could slow down wage and employment growth and make progress in cooling inflation this year, thus eventually pushing the Federal Reserve to begin easing monetary policy. However, Bostic emphasized that this may still take some time, and it will not be known within the next few months whether employment growth can slow down, even though non-farm payroll employment increased by only 175,000 last month, the lowest in six months.
In addition, Austan Goolsbee, president of the Chicago Federal Reserve, stated that he has not seen much evidence that inflation has been consistently higher than the Federal Reserve’s target. This may imply a tendency to support interest rate cuts. However, he did not make a clear statement about when interest rate cuts would be appropriate. He stated at a Minnesota Economic Club event on Friday:
Recently, Nick Timiraos, a journalist from The Wall Street Journal known as the “Fed megaphone,” pointed out that there are two factions within the Federal Reserve, with one faction worried that keeping interest rates at a high level for too long in the face of slowing inflation and wage growth could put more pressure on regional banks, commercial real estate investors, and other industries.
Another faction believes that due to the strong economic performance, there is almost no need for interest rate cuts this year. They are concerned that setting the inflation target at 2% may cause the inflation rate to remain far above 2.5%, and they hope to have more evidence of economic slowdown before considering interest rate cuts.
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