Fed Officials in ‘Wait-And-See’ Mode on Rate Cuts Ahead Of Next Week’s Inflation Data

Ahead of next week’s inflation data, Federal Reserve officials reiterated their skepticism about making any changes to interest rates before they are certain that price increases are slowing down.

Chicago Fed President Austan Goolsbee and Minneapolis Fed President Neel Kashkari said that interest rates were on hold until the Fed got more data that showed the rate of inflation was slowing, during an interview with CNBC Friday.

They joined other Federal Reserve officials today who expressed similar sentiment, as the six interest rate cuts once anticipated in 2024 could now be none.

Dallas Fed President Lorie Logan said at an event today it was “too early” to be considering rate cuts, while Federal Reserve Governor Michelle Bowman commented that she didn’t expect any rate cuts this year.

The comments come ahead of a bevy of inflation data next week, including the Consumer Price Index, as well as the wholesale price report. Progress made in 2023 seemed to be slowing down a little this year, with inflation coming in at 2.7% in its latest reading.

Fed officials said they are looking for signals that annual price increases are coming back down to their target of 2%, though April’s numbers may not give them exactly what they’re looking for.

“We need to gather more information and wait and see,” Goolsbee said, while both said rate hikes could be possible depending on what future data showed. 

Officials Ask if Rates are ‘Restrictive’ Enough

Kashkari continued to raise questions over whether interest rates were “restrictive” enough, suggesting that it could take longer to bring down the inflation rate. He pointed to a housing market where prices continue to soar, despite the Fed’s efforts to raise rates. 

“When we look at real activity, like in the housing market, we’re not seeing as much of a pullback as expected, and that’s what makes me cautious,” Kashkari said. 

Though Goolsbee said he looked at the “real fed funds rate,” which are interest rates that are adjusted for inflation. 

“The level of that is as high as we’ve been for some time, so I feel that we’re restrictive,” Goolsbee said. 

Consumer Inflation Expectations Growing

Earlier at an Economic Club of Minnesota event, Goolsbee commented on today’s release of the Michigan Consumer Sentiment Survey, which showed that consumers were becoming more concerned about inflation.

While consumer inflation expectations were moving higher in the short-term, those were largely a reflection of the recent uptick in inflation readings, Goolsbee said, adding that the survey’s long-term measurements, which ask about a five-year period, was a better indicator of the public’s inflation expectations. That data showed a more modest increase this month.