Mester Expects Fed To Gain Confidence To Cut "Later This Year"

Cleveland Fed’s Mester (’24 voter retiring in June) says she expects the Fed to gain confidence to cut “later this year”.

• The justification: "The current strength in labor market conditions and the strong spending data give us the opportunity to keep the nominal funds rate at its current level while we gather more evidence that inflation truly is on a sustainable and timely path back to 2%"
• Policy is in a good place and it would be a mistake to cut rates too soon. Echoing Fed Chair Powell, we can’t count as much on supply side to lower inflation.
• Data will decide, as Fed could cut rates faster or hold for longer as needed.
• Current reserves level and distribution is more than ample.
• The remarks are broadly similar to prior remarks from last month, when she saw March was probably too early for a cut and that policy was in good place whilst she’s focusing on balancing both sides of mandate this year.