Fed's rate-cut confidence wobbles as inflation data misbehaves
WASHINGTON - As Federal Reserve officials last year started steering the world towards possible interest rate cuts in 2024, they took heart in data showing inflation over many months had collapsed to the U.S. central bank's 2% target, evidence their policies were curbing a still too-hot economy.
While Fed officials might sketch out arguments for continued inflation declines based on"special stories" about housing or other parts of the economy,"when you rely on a whole bunch of special stories breaking your way, it is not a comfortable place," said Dynan, who sees the central bank remaining largely on the sidelines this year, perhaps approving only a single quarter-percentage-point cut in rates.
"I don't think any one month should make that much of a difference," said Barkin, one of the five regional bank presidents with a vote this year on rates policy. But"if you get another month that looks like January or February, that takes you in a very different direction in terms of how forward-leaning you are."
"Something appears to be giving, and it's the pace of the economy," Fed Governor Christopher Waller said in a speech in November in which he said the central bank was potentially just a few months from being able to cut rates to account for falling inflation.
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