The Zhitong Finance App learned that a number of Federal Reserve officials have sent more clear signals, which also makes the market more and more worried about the prospects of future interest rate cuts. Given the slow and difficult progress of reducing inflation in the US and the fact that the US economy is still strong, more and more Federal Reserve officials are beginning to send a similar signal to the outside world: there is no rush to cut interest rates.

Two FOMC voting commissioners discuss interest rate cuts

Atlanta Federal Reserve Chairman Bostic said he is relieved to keep interest rates unchanged and reiterated that he believes it is inappropriate to lower borrowing costs until close to the end of the year.

Bostic said he still believes inflation is moving towards the central bank's 2% target, but he pointed out that this path may be slower than people expected. The Atlanta Federal Reserve Chairman previously said he expects to cut interest rates only once this year.

Bostic said on Thursday, “The inflation rate is very high, too high. We need to reduce it to the 2% target.” “I'm happy to be patient.”

Bostic, who has the right to vote on monetary policy this year, said he will continue to pay attention to employment growth and inflation-adjusted wage growth.

He said, “Our current position is, I think, a restrictive position, which will slow down the economy and ultimately reduce our inflation to 2%.” “But if all of these other good things were happening, I wouldn't be in a hurry to go there.”

Bostic said that if “inflation starts to deviate from our target, I don't think we'll have any choice but to respond to it.” “I have to be open to rate hikes,” he added.

After inflation proved stubborn in the first three months of this year, policymakers are ready to keep interest rates at their current level, the highest level in 20 years. On Tuesday, Federal Reserve Chairman Powell said that continued inflation means that gaining enough confidence to lower borrowing costs may take longer than previously thought.

Traders currently expect that interest rates will only be cut once or twice this year. This is far from the roughly 6 times they expected in early 2024 and the 3 times predicted by the Federal Reserve officials a month ago.

Bostic said the state of American businesses and consumers is “much better” than what is typical in this type of economic cycle, adding, “I hope this continues.”

New York Federal Reserve Chairman Williams, the “top three” of the Federal Reserve and enjoys permanent FOMC voting rights, said that although economic data will determine the Fed's policy trends, he currently does not feel the urgency of cutting interest rates. Williams pointed out in a media event that monetary policy is currently in an advantageous position, and interest rates are gradually pushing inflation closer to the central bank's target.

Williams pointed out that considering the rebound in many US inflation indicators, the market has recently adjusted the expected time for the Fed to cut interest rates for the first time. Federal Reserve Chairman Powell also pointed out on Tuesday that the bank may maintain its current policy status longer than planned. Although Williams himself did not regard further interest rate hikes as a baseline scenario, he did not rule out this possibility, particularly if economic data showed that it was necessary.

Notably, Williams' speech today was more “hawkish” than his speech on Monday. In his earlier speech, he pointed out that the latest inflation data was not a decisive turning point. He has stated that he will pay close attention to subsequent data to adjust his views and predictions.

Furthermore, Williams also stressed that no matter who heads the White House, the Federal Reserve's focus will be on achieving the goals of maximizing employment and stabilizing prices. He believes that keeping inflation low is the cornerstone of economic prosperity, and focusing on a 2% inflation target is the right choice.

A number of officials spoke out

Compared to Bostic's expectations of cutting interest rates once during the year, “Eagle King” Kashkari's views are more aggressive. He directly stood up to “not cut interest rates” during the year.

Kashkari is not this year's voting committee. He said that he also hopes to be “patient” and that cutting interest rates for the first time may not be appropriate until next year.

When asked if it would be appropriate to keep interest rates stable this year in light of the recent unexpected rise in inflation data, Kashkari said “it is possible.”

“I think we need to wait and see and be patient for as long as needed until we are convinced that inflation is falling back to 2%,” he said.

The market is already worried that interest rates will not be cut in 2024

As the Federal Reserve's rhetoric quietly changed, the financial market also began to absorb the reduction in the number of interest rate cuts and the postponement of interest rate cuts during the year.

Now, futures contracts settled at the Federal Reserve's policy interest rate reflect that the market expects the first rate cut in the year to occur in September, while the forecast a few weeks ago was for the first drop in June. Furthermore, CME's US Federal Reserve's observation tool shows that the market anticipates that the possibility of cutting interest rates twice by the end of this year is only around 50%.

Meanwhile, J.P. Morgan Chase President Daniel Pinto even warned on Thursday that given the high level of inflation, the Federal Reserve may not cut interest rates at all this year.

Pinto said that the Federal Reserve may have to wait a little longer to cut interest rates, but the possibility of raising interest rates is very, very low. He believes that the Federal Reserve will not rush to act now because cutting interest rates too soon will have painful consequences and may lead to a recession. Recent economic data shows that US inflation is still higher than many people expected earlier this year, making it less likely that the Federal Reserve will cut interest rates quickly.