Fed officials still expects rate cuts this year, but not anytime soon

The Federal Reserve is considering lowering interest rates to stimulate the economy.

Cleveland Fed President Loretta Mester and San Francisco Fed President Mary Daly believe rate cuts are likely, but they want to see more evidence that inflation is under control.

Daly thinks three cuts this year is a reasonable expectation, while Mester has not ruled out cuts but has excluded the next meeting in May.

Mester emphasizes the need for additional data on inflation before making a decision, as the progress made so far could be temporary or indicative of stalled progress.

She does not expect to have enough information by the next FOMC meeting to make a determination.

Mester’s comments suggest that a rate cut at the April 30-May 1 FOMC meeting is unlikely.

Futures traders anticipate easing starting in June, with a three-quarters of a percentage point reduction by year-end.

While Mester anticipates interest rate cuts, she believes the long-run federal funds rate will be higher than the previous expectation of 2.5%.

This shift reflects a desire to avoid having to take aggressive action in the future.

Overall, the Fed is cautious about cutting rates too soon but is actively considering doing so if inflation continues to show signs of moderation.

Mester and Daly agree that more data is needed before making a firm decision, with Mester ruling out a cut at the next meeting and Daly suggesting that cuts will not happen immediately but are likely in the near future.