In just one day, three more Federal Reserve officials - Chicago Fed Chairman Goolsby, Cleveland Fed Chairman Mester, and San Francisco Fed Chairman Daley - came forward to oppose the current "March rate cut theory" in the market, echoing similar statements made by other Federal Reserve officials last week.
Austan Goolsbee said he was surprised by the huge market response to last week's latest quarterly economic forecast from the Federal Reserve. The market generally expects that the next action of the Federal Reserve may be to cut interest rates, leading to an increase in asset prices, and betting that up to six rate cuts will begin as early as March.
Some Wall Street economists also predict that the pace of easing will accelerate. Economists at Bank of America Corp. currently predict that there will be four 25 basis point rate cuts starting from March next year in 2024.
He said, "I'm a bit confused... is the market just implying to itself, 'That's what we want them to say?' I think people don't seem to understand how the Federal Open Market Committee operates. We won't engage in speculative debates about specific policies for the future. We're just voting on this interest rate meeting."
Gullsby has voting rights at the FOMC meeting this year, but will not have voting rights by 2024.
In addition, Loretta Mester and Mary Daly, who have voting rights for next year's FOMC, also hinted in their latest interview on Monday that the expectation of interest rate cuts early next year is too early.
The market is too advanced
Maester said in an interview on Monday that the market has "advanced" the time for next year's interest rate cut. She expects the Federal Reserve to cut interest rates three times in 2024, each by 25 basis points.
She said, "The next stage is not when to cut interest rates, even though the market is at this stage. But we need to first understand how long monetary policy will remain restrictive in order to ensure that inflation returns to 2% on a sustainable path."
"The market was slightly ahead, and they jumped to the end where we would quickly normalize, and I didn't see that," she added.
Daley said in the latest interview that considering how much inflation has eased this year, policymakers are starting to consider lowering interest rates in 2024 as appropriate, but it is still too early to speculate when a rate cut may occur.
"Now, what I really care about is the development situation in 2023," she said.
Last week, New York Federal Reserve Bank President Williams and Atlanta Federal Reserve Bank President Bostic also made similar comments, stating that decision-makers still need to see "several months" of data to have confidence that inflation will continue to decline.
Mester stated that when it is necessary to actively discuss the timing and path of interest rate cuts, she will closely monitor one-year inflation expectations and the speed at which inflation expectations return to the 2% target.