Written by Michael S. Darby
NEW YORK (Reuters) – Cleveland Federal Reserve Bank President Loretta Mester said on Tuesday she continued to believe the central bank was on track to cut interest rates this year, but needed data to confirm it was possible. Ta.
“My view is that if the economy develops as expected, it will be good for the world. [Federal Open Market Committee] As inflation continues to trend downward toward 2% and labor market and economic growth remain strong, we plan to begin lowering the federal funds rate later this year,'' Mester said. He said this in a speech prepared before the rally. Business Economics Association, Cleveland Business Economics Association, and Team His NEO.
As for the pace, he said: “If the economy develops as I expect, I expect we will be able to lower interest rates in stages.”
Mester warned that he needed to see if future inflation data matched his expectations for further declines before paving the way for an easing of monetary policy stance. He said “I don't think we will have enough information to make a decision before the next FOMC meeting” about rate cuts because that could take time.
The next Fed policy meetings are scheduled for April 30th and May 1st. At the last FOMC meeting in March, officials maintained the target range for the overnight policy rate between 5.25% and 5.5%, continuing to cut interest rates three times this year. Robust inflation data to begin the year have raised questions about when the Fed will start cutting rates and how far they can go.
Mr. Mester will retire in June, but is currently a voting member of the FOMC.
Mester said in his speech that monetary policy is currently in a good position because the strong economy gives the central bank room to incorporate data before changing interest rates. He expects inflation to continue to decline, albeit at a slower pace than last year. He also warned against premature interest rate cuts.
“Reducing interest rates too soon, without sufficient evidence to give us confidence that inflation is on track to return to 2% in a sustainable and timely manner, will undermine the progress we have made on inflation,” Mester said. “I think the bigger risk at this point is to start lowering fund rates too soon.”
Mester also said in his remarks that he had revised up his growth forecast for this year to just above 2%, and said the job market was likely to see an increase in unemployment. Mester also said at the FOMC meeting that he revised the outlook for the long-term federal funds rate to 3% from the previously expected 2.5%.
(Reporting by Michael S. Darby; Editing by Andrea Ricci)