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21/05/24
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Fed Officials Advise Patience on First Rate Cut Timing
On Tuesday, policymakers of the Federal Reserve said it was prudent for the central bank to wait a few more months before starting interest rate cuts to make sure that inflation is really back on its way to the target of 2%.
Fed Governor Christopher Waller said in the absence of the labor market weakening significantly, he needed to see a few more months of good inflation data before he would support monetary policy easing.
He did however put a pin in speculation that interest rates might have to be hiked again for demand to ease enough to soften price pressures further and said the latest inflation data was reassuring and there was a very low probability that rates would be hiked.
The Fed has maintained its benchmark policy rate at between 5.25% and 5.50% since July 2023 and, having to face 3 months of higher-than-expected inflation readings from Jan. to Mar., was cautiously welcoming recent encouraging signs of the labor market easing and the return to more progress of inflation lowering toward the 2% target.
Waller’s remarks seem to add to market confidence in the Fed cutting rates, and traders firmed up expectations for a first rate cut in Sept.
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