Fed Shifts Stance: US Rate Cuts Pushed Back Amid Changing Rhetoric


The chorus of senior Fed officials advocating caution in hastily implementing interest rate cuts continues to swell. Despite US inflation maintaining comfortable levels, domestic concerns are mounting, while expectations for policy easing are waning on the global stage.

"There's no clear need to adjust monetary policy in the very near term," remarked president and chief executive officer of the Federal Reserve Bank of New York John C. Williams to reporters on Thursday. This statement came in the wake of unexpectedly robust consumer price inflation figures, which prompted traders and some analysts to speculate about a delayed onset of Fed rate cuts.

“Recent data suggest it may take more time than I had previously thought to gain greater confidence in inflation’s downward trajectory, before beginning to ease policy,” explained Boston Fed President Susan Collins at a separate event in New York. She emphasized that a robust labor market "also reduces the urgency to ease."

In the meantime, Federal Reserve Chair Jerome Powell remarked that inflation has emerged as a more serious challenge than anticipated by the U.S. central bank officials just a couple of months ago, while other economic indicators show no signs of deceleration. Consequently, this combination postpones the anticipated commencement of the easing cycle.

CEO of the Federal Reserve Bank of Richmond Thomas Barkin, who had previously expressed apprehensions regarding inflation levels, stated on Thursday that the latest data "did not increase my confidence" regarding the broad alleviation of price pressures across the economy.

While both Collins and Williams, the Vice Chair of the Federal Open Market Committee, acknowledge the necessity for future rate cuts, Collins anticipates these adjustments to occur "later this year."

Williams also observed that the recent "bumps" in inflation metrics caught them off guard, highlighting that any surprises lay in the swiftness with which alleviated last year.

Following the release of the CPI data, economists at Goldman Sachs, Bank of America, Barclays, and Wells Fargo adjusted their forecasts, revising their expectations to just one or two rate cuts throughout the year, compared to their previous forecast of three. Some analysts now speculate that US borrowing rates may remain unchanged until 2025.

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