Fed’s Mester views three rate cuts as appropriate, yet decision tightly contested

Cleveland Fed President Loretta Mester said overnight that three rate cuts might be appropriate this year, though she mentioned, “it’s a close call” on the possibility of fewer reductions being needed.

Addressing the upcoming meeting scheduled for April 30-May 1, Mester expressed that it is unlikely there will be sufficient information available to make a decision on reducing rates by then. However, she left the door open for a rate cut in June, stating, “We have to be data dependent so I don’t want to rule that out.”

Mester highlighted the importance of upcoming data to gauge whether the disinflation process is merely experiencing a “temporary detour” or if there are signs that efforts to bring inflation back down to the 2% target are faltering.

She cautioned against premature or overly rapid rate reductions, warning that such actions could jeopardize the progress made on inflation control. “Moving rates down too soon or too quickly without sufficient evidence to give us confidence that inflation is on a sustainable and timely path back to 2% would risk undoing the progress we have made on inflation,” Mester remarked.