Fed officials Loretta Mester and Mary Daly signaled Tuesday that three rate cuts are still likely for 2024, with Mester hinting that a cut in June is a possibility.
“I don’t want to rule that out,” said Mester, who is president of the Cleveland Fed.
Mester noted the inflation picture had not "changed very much" despite some hotter-than-expected numbers at the start of 2024.
But she said she still wants to see more data to figure out whether those readings were "a detour or whether they’re the new kind of path."
"If the economy evolves as expected, then in my view it will be appropriate for the FOMC to begin reducing the fed funds rate later this year," Mester said in a speech to the National Association for Business Economics in Cleveland.
Daly, the president of the San Francisco Fed, also called three cuts in 2024 a "very reasonable baseline" while noting "we still have more work to do."
Mester and Daly became the latest Fed officials to offer assurances about the number of cuts in 2024 while at the same time making it clear the Fed is in no hurry to ease monetary policy.
Chicago Fed president Austan Goolsbee also told Yahoo Finance late last month that three rate cuts in 2024 are "in line with my thinking."
A new inflation report released Friday showed a slight cooling in the Personal Consumption Expenditures index, which is the Fed's preferred inflation gauge. That followed stickier readings in January and February from other gauges, such as the Consumer Price Index.
Fed Chair Jerome Powell said Friday that the new PCE report was "not as low as most of the good readings we got in the second half of last year, but it's definitely more along the lines of what we want to see," sticking to an assertion that inflation is still on a "bumpy path" to the central bank's goal of 2% during a question and answer session at a San Francisco Fed conference.
The Fed decided last month to hold interest rates steady and maintain projections for three rate cuts this year. Officials also raised their outlook for inflation and economic growth.
Mester said her projection for the number of rate cuts this year is in line with the median of three — maintaining what she told Yahoo Finance in an interview a little over a month ago.
The inflation picture, she added, "has not changed very much since the start of the year, because I had already thought that the pace of disinflation would slow down this year."
She said she does not expect to have enough information by the time of the Fed’s next policy meeting on May 1 to determine whether inflation is on a sustainably downward path to justify lower rates.
Traders are betting that the next cut will happen at the June meeting, although they have been scaling back those odds amid strong reports of manufacturing data and personal income and spending for February.
The chances of a June cut currently stand at roughly 63% as of Tuesday afternoon.
If the job market deteriorates, Mester said, the Fed could move rates down sooner and more quickly. But if inflation appears to be stalling the central bank could hold rates higher for longer.
Mester has revised up her projection for economic growth this year based on the latest economic data, though she still expects growth to moderate this year compared with last year’s hot pace.
She also said she expects the job market to continue to come into better balance this year, with a slight uptick in the unemployment rate from its current low level.
Daly said inflation is in fact coming down, albeit in a "bumpy and slow" fashion.
"There is really no urgency to adjust the rate," she said. "Standing pat," she added, "is the right policy for the moment."