Federal officials anticipate rate cuts later this year, though not in the immediate future

Welcome to Extreme Investor Network, where we provide expert insights on all things finance. In today’s blog post, we’ll be discussing the latest update from Cleveland Federal Reserve President Loretta Mester regarding interest rate cuts and inflation progress.

Mester recently stated that she still expects interest rate cuts this year, but they are unlikely to happen at the next policy meeting in May. She also mentioned that the long-term path for interest rates is higher than previously anticipated. Her colleague, San Francisco Fed President Mary Daly, shares a similar view, expecting cuts this year once there is more evidence of subdued inflation.

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Despite the progress made on inflation and economic growth, Mester emphasized the need for more data to boost her confidence in the trajectory towards the 2% inflation target. Additional inflation readings will play a key role in determining whether recent data points are temporary fluctuations or signs of stalling inflation progress.

While Mester’s comments point towards a delay in rate cuts, futures traders are anticipating easing to start in June with a projected cut of three-quarters of a percentage point by the end of the year. Daly, another FOMC voter, also sees three rate reductions as a reasonable baseline.

Regarding the long-run federal funds rate, Mester believes it will be higher than the previously expected 2.5%, with the neutral rate around 3%. This adjustment reflects the Fed’s strategy to calibrate policy in response to economic developments, avoiding the need for aggressive actions.

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