Fed Governor Philip Jefferson issued a cautious message in a speech last night, stating that while April’s inflation data was “encouraging,” it remains “too early to tell” if the recent slowdown in disinflation will be “long lasting.” He described current monetary policy as restrictive and declined to predict whether rate cuts will happen this year. He emphasized the importance of continuing to closely monitor incoming economic data, the outlook, and the balance of risks.

Separately, Cleveland Fed President Loretta Mester told Bloomberg Television that she is reconsidering her earlier forecast of three interest rate cuts this year. Although not her “base case,” Mester noted that if progress on reducing inflation stalls or reverses, Fed is “well positioned” to increase rates if necessary.

San Francisco Fed President Mary Daly also shared her views, expressing doubt about achieving the 2% inflation target in the near term. Daly highlighted that while there are expectations for improvement in shelter inflation, the progress is not expected to be rapid.

Fed Vice Chair Michael Barr stated in a speech today that while inflation has decreased from its peak of 7.1% to 2.7%, it is “not yet all the way to 2% target. He noted that inflation readings for the first quarter were “disappointing,” as highlighted in FOMC’s recent statement.

“These results did not provide me with the increased confidence that I was hoping to find to support easing monetary policy by reducing the federal funds rate,” Barr noted.
He added that Fed’s restrictive policy would need “some further time to continue to do its work” in bringing inflation down.

Atlanta Fed President Raphael Bostic stated in a BloombergTV interview today that it will take time before the Fed is confident that inflation will return to 2%. He reiterated his stance that “nothing has changed” regarding his view that perhaps only one rate cut will be necessary this year.

He noted that inflation data for the first part of the year has been “very bumpy,” reflecting a slow but gradual slowdown in economic activity. Bostic mentioned that business leaders report a gradual slowdown in their operations, with pricing power weakening.

“I do think that our new steady state is likely to be higher than what people have known over the last decade — maybe back to where we were in the 1990s and 2000s, but we’ll just have to see,” Bostic added, suggesting a shift in the long-term inflation outlook compared to recent years.

Some Fed officials have emphasized overnight the need for a extended period of restrictive monetary policy as they seek clearer signs of sustainable inflation reduction.

At an event, Cleveland Fed President Loretta Mester stated that incoming economic data suggests it will “take longer” to gain the confidence needed to start lowering interest rates. Mester emphasized that “holding our restrictive stance for longer is prudent” as Fed seeks clarity on the inflation path.

Atlanta Fed President Raphael Bostic, speaking at another event, acknowledged that the April inflation report provided some important insights, particularly noting a slowed rise in shelter costs. However, he cautioned that “one data point is not a trend,” highlighting the importance of watching the May and June data to ensure figures don’t reverse.

In a CNBC interview, Richmond Fed President Thomas Barkin reiterated the need for patience, noting that achieving 2% inflation sustainably “is going to take a little bit more time.” Barkin pointed out that there is still significant movement on the services side of the economy.

In a Reuters interview, New York Fed President John Williams expressed confidence in the current state of monetary policy, stating that it is “in a good place.” He highlighted the positive mix of economic data, noting strong consumer spending, business investment, and GDP growth. He emphasized that the economy is “not really at a near-term risk” and remains robust, supported by a strong labor market.

Williams indicated that he does not see any immediate need to tighten monetary policy, as current indicators do not suggest that the Fed’s actions are harming the economy or interfering with its goals. “So I don’t see any need to tighten monetary policy today,” he added.

Looking ahead, Williams acknowledged that lower interest rates would be necessary as inflation approaches 2% target. He explained that once inflation is sustainably at this level, Fed would need to reduce its “restrictive influence” on the economy, and move to a “more neutral kind of position.”

Chicago Fed President Austan Goolsbee, in a Marketplace interview, emphasized the importance of a significant decline in housing inflation to achieve the Fed’s 2% overall target.

“It would be hard for me to see that we could get to the 2% overall target unless house prices, inflation comes down substantially from where it is right now,” Goolsbee stated.

Despite the current challenges, Goolsbee remains optimistic, noting, “I’m still both optimistic and my read of the evidence is that that is going to happen.” He pointed to yesterday’s CPI numbers, which show some decrease in housing costs, as a positive sign.

However, he cautioned that if this trend does not continue, Fed will need to delve deeper to understand the underlying issues.

Minneapolis Fed President Neel Kashkari stated overnight that Fed likely needs to keep interest rates at the current level for “a while longer,” raising questions about how much they are restraining the US economy.

He highlighted that the “biggest uncertainty” is understanding the exact amount of “downward pressure” monetary policy is putting on the economy. This uncertainty means Fed “probably need[s] to sit here for a while longer” until there is more clarity on where “underlying inflation is headed” before drawing any conclusions.

He remarked on the surprising “resilience” of the economy, suggesting that current interest rates might mean “we’re putting one foot on the brake and not two.”