(Bloomberg) — Three Federal Reserve officials on Friday emphasized that incoming data will guide their decision on when to cut interest rates, and made clear they haven’t seen enough evidence yet to begin easing.
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“While I think it’s appropriate for us to look forward and ask when would policy adjustments be necessary so we don’t put a stranglehold on the economy, it’s really premature to think that that’s around the corner,” San Francisco Fed President Mary Daly said Friday in an interview on Fox Business.
“Do I get consistent evidence that inflation is coming down, or do I get any early signs with the labor market starting to falter?” said Daly, who votes on monetary policy decisions this year. “Neither one of those right now is pushing me to think that an adjustment is necessary.”
The odds of a March rate cut have ebbed significantly in recent days, falling below 50% on Friday. Fed officials, including Daly, have pushed back against market expectations of imminent and deep rate reductions this year.
Atlanta Fed President Raphael Bostic, while open to changing his outlook, still anticipates the first rate cut won’t be until the third quarter.
“I’d be open to changing that outlook and my view about when we need to start cutting rates,” Bostic said in an interview on Fox Business on Friday. But he added that he wants “to make sure that we are well on our way to 2% before we move off of our restrictive stance.”
Policymakers’ quarterly projections from December implied three interest-rate cuts in 2024 — or some 75 basis points of cuts.
Of course, much depends on what inflation data show over the coming weeks. That includes next week, when the Fed’s preferred inflation gauges for December will be released.
“If we continue to make surprising progress faster than was forecast on inflation, then we have to take that into account in determining the level of restrictiveness,” Chicago Fed President Austan Goolsbee said Friday in an interview on CNBC. As inflation comes down, “we would clearly be evaluating the responsiveness.”
While Goolsbee didn’t comment directly on the timing of the central bank’s first rate cut, he suggested that if price pressures ease faster than anticipated, policymakers can lower borrowing costs to ensure that real interest rates — adjusted for inflation — don’t keep rising.
“It’s fundamentally about the data and what will enable us to become less restricted is if we have clear evidence that we’re on a path to get to the 2% target,” Goolsbee said.
The policymakers spoke just hours before the Fed’s traditional pre-meeting communications blackout period. The central bank is expected to keep rates unchanged again when they convene Jan. 30-31.
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