Philadelphia Fed President Patrick Harker has indicated that “some additional tightening may be needed to ensure policy is restrictive enough to support both pillars of our dual mandate.” Harker expects that once this point is reached, which he believes should happen this year, the Fed will “hold rates in place and let monetary policy do its work”.

Harker also noted that the economy remains strong and inflation is coming down, albeit slowly. He projected that inflation, currently at a 5% annualized rise in the personal consumption expenditures price index, would fall to 3% to 3.5% this year and reach 2% in 2025. The unemployment rate, currently at 3.5%, is expected to move up to around 4.4% this year amid tepid growth.

The bank president acknowledged the impact of last month’s financial sector woes on the economy, stating that “it will take some time to evaluate how recent events may impact overall economic activity and inflation.”
Harker added that he expects to see tighter credit conditions for households and businesses, which may slow economic activity and hiring, but the full extent of this impact is still unclear.

Atlanta Fed President Raphael Bostic, Dallas Fed President Lorie Logan, and Fed Governor Michelle Bowman have all expressed concerns over the persistently high inflation rate.

Bostic, speaking on CNBC, said that “one more move should be enough for us to then take a step back and see how our policy is flowing through the economy, to understand the extent to which inflation is returning back to our target.” He acknowledged that inflation has been much too high, with Fed having raised interest rates by 4.5 percentage points over the past year in an attempt to bring the economy into better balance.

Lorie Logan emphasized the need for sustained improvement in inflation statistics, an economy evolving as forecast, and a change in the factors underlying inflation, such as the hot labor market and imbalance in supply and demand. She reiterated the concern, stating, “As you surely know, inflation has been much too high.”

Bowman also highlighted the importance of the Fed’s focus on lowering inflation. She said, “Lately, as you know, the Fed has been focused on lowering inflation, which is essential if we want to support a growing economy and rising incomes.” Bowman added, “We clearly need to continue to work to bring inflation down.”

Cleveland Federal Reserve President Loretta Mester emphasized the need for further tightening in monetary policy to ensure a “sustained downward trajectory” of inflation. She pointed out that “demand is still outpacing supply in both product and labor markets and inflation remains too high.”

To tackle the persistent inflation, Mester suggested that monetary policy will need to “move somewhat further into restrictive territory”, with fed funds rate “moving above 5%” and “real fed funds rate staying positive for some time”. However, she also acknowledged that the tightening journey is closer to its end than the beginning, with future rate decisions being dependent on the economy’s performance.

Mester expects the unemployment rate to rise to between 4.5% and 4.75% and inflation to ease to 3.75% this year. She projects that inflation will reach the central bank’s 2% target by 2025. In response to an audience question, Mester emphasized the Fed’s aim for a “soft landing” and mentioned that she expects slow growth, well below 1%, in the current economic environment.

New York Fed President John Williams emphasized the need to utilize monetary policy tools to achieve price stability during a speech at the Money Marketeers of New York University. He expressed confidence in attaining a sufficiently restrictive stance to bring inflation down to Fed’s 2% longer-run goal

Williams noted that “the most recent data indicate that this trend of slowing inflation is continuing.” He expects PCE core inflation to ease to 3.25% this year and reaching the 2% target within the next two years. He also commented on the labor market, calling it “very tight” but showing some signs of cooling. Williams expects the unemployment rate to rise to between 4% and 4.5% over the next year, with growth moderating this year before rebounding next year.

Additionally, Williams addressed the recent major bank collapse in the US, stating that the banking system remains sound and resilient. However, he anticipates that the collapse will result in tighter credit conditions for households and businesses, which could impact spending. Williams highlighted the importance of closely monitoring credit conditions and their potential effects on the economy.