Fed Officials Confident Inflation Is Easing, But Want More Evidence Before Cutting Rates

BY Benzinga | ECONOMIC | 02/23/24 01:48 PM EST

After more than 10 interest rate hikes by the Federal Reserve in the last two years, investors have come around to expecting rate cuts in 2024.

Several Federal Reserve officials are throwing caution to upcoming rate cuts.

What Happened: Investors have been pricing in rate cuts by the Federal Reserve in 2024, but recent reports showing inflation rates may have eased rate cuts in the near term.

On Thursday, Federal Reserve member Lisa Cook said she was optimistic that inflation is cooling, but wants more evidence of getting closer to the 2% target before discussing cutting interest rates.

"At some point, as we gain greater confidence that disinflation is ongoing and sustainable, that changing outlook will warrant a change in the policy rate," Cook said at a Princeton University event, as shared by Bloomberg.  

Cook said that savings built up by consumers during the pandemic are "diminishing."

At a separate Thursday event, Federal Reserve Vice Chairman Philip Jefferson also expressed caution.

"Excessive easing can lead to a stalling or reversal in progress in restoring price stability," Jefferson said.

Jefferson said three key risks to consider are consumer spending, oil and other commodity markets and weakened employment.

Federal Reserve member Christopher Waller also shared caution during a speech in Minneapolis Thursday.

"The strength of the economy and the recent data we have received on inflation mean it is appropriate to be patient, careful, methodical, deliberative," Waller said.

Waller added "What's the rush?" in his speech and said the jump in consumer prices shown in January makes him more cautious.

Related Link: Fed Minutes Stress Inflation Vigilance, Push Back Earlier Rate Cut Moves: Officials Flag Commercial Real Estate Risks

What's Next: The cautious comments from the three Federal Reserve members show that rate cuts could be happening later than originally expected.

Federal Reserve Chairman Jerome Powell said at the Fed's January meeting that a rate cut announcement in March was unlikely.

Some investors and economists originally expected the Federal Reserve March 19 to March 20 meeting to come with an interest rate cut announcement.

New expectations from many investors and based on the comments from the Federal Reserve members could suggest that the Fed's June or July meeting will be when the first interest rate cut happens.

Read Next: Mortgage Rates Climb Above 7% As Hot Inflation Dampens Expectations For Fed Cuts

Image: Shutterstock

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