Fed open to rate cuts if it’s clear inflation is easing further

New York: Federal Reserve Bank of Cleveland President Loretta Mester said that if the U.S. economy performs as she expects it could open the door to rate cuts, but she’s not ready yet to offer any timing for easier policy amid ongoing inflation uncertainty.

“Monetary policy is in a good place from which to assess and respond” to risks to the outlook, Mester said in a speech to a gathering of the Ohio Bankers League in Columbus, Ohio, reports Reuters.

“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%,” she said.

When it comes to the tactics of rate cuts, “I don’t want to put a particular calendar date on it – it really is dependent on the state of the economy,” Mester told reporters after the speech in a teleconference. She added there’s “no rush” to cut rates in her view, while noting her existing forecast of three rate cuts for the year still seemed reasonable.

Mester also warned in her formal remarks that no near-term change in policy is also possible. “If inflation appears to be stalling at a level above our goal, we would have the opportunity to maintain a restrictive stance for longer,” she said.

Mester’s comments were her first since last week’s Federal Open Market Committee meeting.

Mester, who will retire from the Fed this year, warned that it’s not a guarantee that price pressures will continue to abate as quickly in the future as they have thus far.

Image courtesy of Wikipedia

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