The Federal Reserve is painting a pie again!
The interest rate cut still depends on the development of data!
Two members of the Federal Reserve issued a statement on interest rate cuts:
New York Fed President John Williams said in a statement today that he expects interest rates to gradually move lower over time. But he did not specify when the Fed might begin to ease monetary policy.
“I expect interest rates to gradually decline over the next few years, reflecting that inflation is back toward our 2% objective and that the economy is on a very strong sustainable path,” Williams told Fox Business.
Asked whether the Fed's September rate cut was in line with current market expectations, Williams declined to predict a specific path for policy. He stressed that the outcome "depends on how the data develops," and said "I think things are moving in the right direction" toward eventual easing of policy.
Williams' comments were his first since the Fed's policy meeting last week, where policymakers kept the central bank's benchmark interest rate in a range of 5.25% to 5.50%. The Fed also released updated economic projections, trimming the number of rate cuts it expects this year to one from three in March. The cut comes after stronger-than-expected inflation data for the first few months of 2024.
Williams stressed that the Fed's "first priority is to make sure inflation gets back to 2%." He rejected the idea that the Fed would allow inflation to remain at 3%.
It also fueled an ongoing debate over whether some recently released data overstated the strength of the job market. Williams said that overall, the data "compellingly tells me that our labor market remains very strong and that we are seeing a slowdown in hiring." However, he acknowledged that some parts of the jobs data may be "overstated," adding that it would take time to verify that.
In related news, Fed Chairman Barkin also made various comments on inflation. He noted that they are behind the curve on inflation and it is hard to know how much of a signal inflation could have sent over the last year, this quarter, or the last few weeks.
On the services sector, Barkin still believes that companies are raising prices as much as possible. Barkin noted that housing and services inflation have not yet reached ideal levels. However, he believes that this month's inflation data is quite encouraging.
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