Rate cuts in sight? Fed official sees “positive” inflation data but needs more

The president of the Bank of the Federal Reserve New York’s John Williams said the inflation data The recent developments have been encouraging, but he wants to see more evidence in the coming months that will give him the confidence to reduce borrowing costs.

In an interview with the Wall Street Journal published Wednesday, Williams He said the central bank will learn “a lot“between July and September, a month in which the authorities are expected to reduce interest rates.

The comments from the New York Fed chief, along with those from central bank Chairman Jerome Powell and other policymakers in recent days, suggest the Fed is moving closer to cutting rates but is not yet ready to do so.

Readings of the last three months “They are bringing us closer to the disinflationary trend that we are looking for.“, said. “These are positive signs. I would like to see more data to have more confidence that inflation is moving sustainably towards our 2% target.,” added the vice-chairman of the Fed’s rate-setting committee and one of the main advisers to President Jerome Powell. The interview took place on Tuesday.

His comments are interpreted by the WSJ to mean that the central bank may consider lowering its benchmark interest rate in the near term, particularly when policymakers meet again in mid-September.

Policymakers are due to meet on July 30-31, but investors are betting they will not begin cutting rates until their September meeting.

Williams echoed Powell’s remarks, noting the importance of balancing the risks of keeping rates too high for too long, which could hurt jobs, against premature cuts and stalling progress in curbing price pressures.

“In fact, we are going to learn a lot between July and September.“Williams said.Both objectives of our dual mandate are very much in my thinking about policy decisions, but it is absolutely essential that we can achieve this goal of bringing inflation back to 2%”.

US central bankers said in June that they were expecting a “greater confidence” that inflation was sustainably slowing toward its 2% target before cutting its policy rate, which it has held at a more than two-decade high for about a year. Recent data have shown a further easing of price pressures, with a key gauge of consumer prices posting its smallest advance since 2021 in June.

“I feel that the political stance at this moment is working well.“, said Williams. “If we get more data like this, I think I’ll be more confident.“where inflation is moving sustainably towards 2%.”

“I think that at some point we will have to make the decision, not to abandon the restrictive policy, but to lower interest rates in such a way that the degree of restriction of the policy decreases.“He concluded about rates that are currently in the range of 5.25%-5.5%, their highest level in 23 years.