Echoing Daly’s cautious approach, Kansas City Fed president Jeffrey Schmid said the Fed should wait for solid evidence that inflation is decreasing towards the 2% target before considering lowering interest rates.
“With inflation running above target, economic growth continuing to show momentum, and elevated prices across a range of asset markets, the current stance of monetary policy is appropriate,” he said during a speech in Overland Park, Kansas.
Recent data shows that core consumer prices, which exclude food and energy, rose by 0.4% in March and were up 3.8% from the previous year. This has made Fed officials like Schmid advocate for patience, highlighting the need for definitive signs of declining inflation before making any policy changes.
“We’ve got to get this inflation thing right,” Schmid said. “We need to let this policy work its way through the system like it is.”
Market expectations have adjusted accordingly, with traders now leaning towards only two rate cuts this year, likely starting in September. This aligns with sentiments from other Fed officials, including Susan Collins of the Boston Fed, who sees two rate cuts as more likely than three in the current economic environment.
Source: mpamag.com