(Bloomberg) — Several Federal Reserve officials said the central bank should keep borrowing costs high for longer as policymakers await more evidence inflation is easing, suggesting they’re not in a rush to cut interest rates.
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Cleveland Fed President Loretta Mester, New York Fed President John Williams and Richmond Fed President Thomas Barkin, speaking separately Thursday, argued it may take longer for inflation to reach their 2% target.
“Incoming economic information indicates that it will take longer to gain that confidence,” Mester said Thursday during an event in Wooster, Ohio. “Holding our restrictive stance for longer is prudent at this point as we gain clarity about the path of inflation.”
The Cleveland Fed chief said she expects price growth to cool at a slower pace than last year now that there is less downward pressure from improving supply chains.
Mester, who votes on policy decisions this year, is stepping down at the end of June when her term expires. She said policy was well positioned and it was too soon to say progress on inflation had stalled, reiterating comments she made earlier this week.
Williams made similar comments in a Reuters interview published Thursday, saying he doesn’t see a reason for adjusting monetary policy now. “I don’t expect to get that greater confidence that we need to see on the inflation progress towards a 2% goal in the very near term,” he said.
Barkin, speaking Thursday on CNBC, said demand needs to cool further to get price growth to the Fed’s goal, noting goods inflation has come down significantly as supply chains have healed.
“To get to 2% sustainably in the right kind of way, I just think it’s going to take a little bit more time,” said Barkin, who also votes on policy decisions this year.
Data released Wednesday showed a measure of underlying US inflation ebbed in April for the first time in six months, providing some progress in the direction Fed officials would like to see before reducing rates. The core consumer price index, which excludes food and energy costs, rose 0.3% from March after three months of greater-than-expected readings, Bureau of Labor Statistics figures showed.
Atlanta Fed President Raphael Bostic, who also spoke Thursday, said he was grateful for the cooling seen in the latest report. He noted, however, that he will be watching the May and June data to make sure the figures don’t turn back the other way.
Should the outlook evolve as he expects — slowly moderating inflation and continued economic momentum — Bostic said, “it could be appropriate for us to reduce rates toward the end of the year.”
Mester said the report offered a “welcome tick down” in monthly inflation, but she and other central bankers have said they want to see more data to be confident inflation is headed to the Fed’s 2% goal.
Officials kept their benchmark rate steady earlier this month at a target range of 5.25% to 5.5% — the same level it’s been at since July. Fed Chair Jerome Powell said Tuesday that officials will “need to be patient and let restrictive policy do its work.”
Barkin echoed that view, saying the Fed needs to keep borrowing costs high for longer to ensure inflation is on track to its target, citing higher prices in the services sector. Fed policymakers will meet next on June 11-12.
“I still think there’s just a lot of movement on the services side and it’s going to take a little bit of time,” Barkin said. “I do believe we are on the right path here.”
–With assistance from Steve Matthews, Amara Omeokwe, Reade Pickert and Laura Curtis.
(Adds comments from Bostic in tenth paragraph.)
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