Fed officials have been flooded with hawkish comments recently, and the market generally believes that interest rate cuts may not be needed this year. Several Fed presidents stressed that more evidence of falling inflation is needed before cutting rates, indicating that they are willing to wait for data to assess the situation.
In his remarks on Thursday, Minneapolis Fed President Kashkari said that if inflation stagnates, the Fed may not need to cut interest rates this year, especially if the economy remains strong. He stressed that it is necessary to see prices moving toward the Fed's 2% target before considering taking action. Cleveland Fed President Mester also hinted that while the Fed may be close to the confidence level needed to start cutting interest rates in the coming months, she hopes to see more data to confirm whether inflation will resume its decline.
Meanwhile, Chicago Fed President Goolsbee said that although inflation data in January and February were higher than expected, this would not change the overall cooling trend of price growth. He expects overall inflation to return to target levels. Richmond Fed President Barkin also believes that it is wise to take the time to get a clearer understanding of the inflation trajectory before cutting interest rates, and he believes that tightening measures will further slow the economy.
However, Philadelphia Fed President Harker pointed out that despite the economy remaining resilient and strong job growth, inflation is still too high and has not reached the ideal level. Former New York Fed President Dudley said that interest rates may not fall as much as Fed officials currently expect in the next few years, and the market expects long-term interest rates to be higher than the Fed's forecast.
This series of remarks triggered a sharp reaction in the market, with the US dollar index rebounding in a V-shape and gold falling for the first time in seven days. Investors are paying close attention to the direction of the Fed's future monetary policy and look forward to more data and signals to guide investment decisions.
