Two Federal Reserve policymakers said Tuesday that It is prudent for the central bank to wait several more months to ensure that inflation really returns to the 2% target path. before starting to cut interest rates.
“Absent a significant weakening of the labor market, I need to see several more months of good inflation data before I feel comfortable supporting an easing of the monetary policy stance”said FED Governor Christopher Waller in a speech to the Peterson Institute for International Economics in Washington.
The FED has maintained its reference interest rate between 5.25% and 5.50% since July and, after three months of higher-than-expected inflation between January and March, has cautiously welcomed the most recent signs of labor market relaxation and progress in reducing inflation towards its 2% target.
In comments after the speech, Waller said the Fed wants demand to moderate, while putting a lid on speculation about the need to raise interest rates again.stating that the latest inflation data is “reassuring” and that the central bank's official interest rate has been set appropriately.
“We don't want to fall off a cliff, that's the most important thing. “Right now we don't see anything that makes us think that if we continue like this for three or four months the economy is going to collapse.”Waller said.
Currently, Traders expect the central bank to make a first rate cut in September and they see a greater likelihood of a second cut at the FED's last meeting of the year, in December.
In another appearance, Atlanta Fed President Raphael Bostic struck a similar tone, saying the central bank should be cautious about approving its first rate cut. to ensure that we do not encourage pent-up spending among businesses and households, and put monetary policymakers in a position where inflation accelerates.
“We are interested in not starting to stumble (…) I would prefer to wait longer to make sure that doesn't happen”Bostic told reporters on the sidelines of a Fed conference in Atlanta, Florida, adding that he still expects inflation to decline throughout the year and that a one-time rate cut would be appropriate in the fourth quarter.
“I'm not in a hurry to lower rates,” Bostic said. “We have to make sure that, when we start down that path, there is no ambiguity that inflation is going to reach 2% (…) the existence of this potential exuberance means that we have to be very cautious about when we make that first moveand may mean it has to happen later.”
