On Thursday Eastern Time, multiple Federal Reserve officials issued a series of "hawk sounds" warning of the risk of too fast a rate cut.
After Federal Reserve Vice Chairman Philip Jefferson earlier warned of the risk of excessive easing, Philadelphia Fed Chairman Patrick Harker and Federal Reserve Director Lisa Cook also delivered speeches, emphasizing the need for the Fed to maintain policy composure to avoid premature interest rate cuts that could undermine previous efforts to lower inflation.
Emphasize the risk of too fast interest rate cuts
Huck said in his speech that lowering interest rates this year may be appropriate, but he emphasized the risk of premature policy relaxation. Huck does not have voting rights on monetary policy decisions this year.
He stated at an event in Delaware that prematurely reducing borrowing costs may tarnish the progress made by the Federal Reserve in inflation. He will closely monitor the upcoming data to verify the downward trend of price growth.
Huck said:
"I believe we may see a decrease in interest rates this year. But I want to remind everyone not to expect it to happen immediately. We have time to handle this issue correctly, and we must do so."
Huck praised the progress made by the United States in inflation over the past few months, but expressed his desire to see a broader cooling of inflation. In the group discussion after the speech, he stated that he was waiting to observe data for several months and did not rule out the possibility of the Federal Reserve lowering interest rates at its May meeting.
"I think we're already close," he said. "Let's just have a few more meetings."
"When we start this (interest rate cut) process," he said, "let's start with a stable, slow decrease, because for me, this will minimize the risk."
Huck also stated that once interest rate cuts begin, the Federal Reserve should systematically lower interest rates, possibly at every meeting.
&Amp; Quota; Therefore, in short, I believe that our biggest economic risk comes from premature interest rate cuts to prevent inflation from reigniting and putting the efforts of the past two years in vain right in front of us& Amp; Quota; Huck said.
Similar to Huck, Federal Reserve Governor Cook also stated that she hopes to see more progress in inflation before starting to cut interest rates.
"I hope we can start lowering interest rates only after we have greater confidence in inflation approaching 2%," Cook said at a macro finance conference at Princeton University on Thursday. "I hope to gradually adjust policies by slowly lowering interest rates to reflect changes in risk balance."
Federal Reserve Vice Chairman Jefferson had previously made similar remarks. He said that as inflation improves, officials should be cautious about excessive rate cuts, but it may be appropriate to start the rate reduction process later this year.
The Last Mile Towards Inflation Target
A report earlier this month showed that the US Consumer Price Index (CPI) rose more than expected in January, driven by housing and service costs, while commodity prices continued to decline. Next week, the Federal Reserve's more focused inflation indicator, the Personal Consumer Expenditure Price Index (PCE), will be released.
Although the January CPI unexpectedly exceeded market expectations, Federal Reserve officials clearly did not overly worry in their speeches and are still patiently waiting for more data to see the trend of US inflation.
Huck said:
"Due to the possibility of uneven and sometimes imbalanced progress, it is important for us to see more evidence that allows us to go beyond the unpredictability of monthly data and ensure we continue on the right path... Anyway, overall data shows that we are in the last mile of reducing personal consumption expenditure inflation to the target annual growth rate of 2%."
Cook stated that the risks faced by the Federal Reserve's dual goals of price stability and employment maximization are now in a better balance, rather than focusing more on inflation as in previous years.
She also pointed out that the process of achieving the 2% inflation target may continue to be bumpy:
"It is expected that personal consumption expenditure (PCE) will gradually approach our target of 2% in the next 12 months, which still appears to be a reasonable basic prospect."
She said, "As we receive more data, we should continue to act cautiously and maintain the necessary level of policy restrictions to sustainably restore price stability while keeping the economy on a good track."