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The market has priced in a number of rate cuts by the Fed through 2024, but this weekend Jerome Powell signaled on 60Minutes that growth was too strong and inflation was too high to consider cuts just yet. CBS’s Scott Pelley asked, “Why not cut rates now?” Powell replied:
Well we have a strong economy. Growth is going on at a solid pace. The labor market is strong: 3.7% unemployment. With the economy strong like that, we feel like we can approach the question of when to begin to reduce interest rates carefully. And we, you know, want to see more evidence that inflation is moving sustainably down to 2%. We have some confidence in that. Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates.
Echoing Powell were Minneapolis Fed President Neal Kashkari, who published an essay on his bank’s website today saying
It is possible, at least during the post-pandemic recovery period, that the policy stance that represents neutral has increased. It gives the FOMC time to assess upcoming economic data before starting to lower the federal funds rate, with less risk that too-tight policy is going to derail the economic recovery.
Chicago Fed President Austan Goolsbee said he’d like to see inflation drop even further before rate cuts begin. He told Bloomberg Television’s Michal McKee. Bloomberg’s Catarina Saraiva and Michael McKee report:
Federal Reserve Bank of Chicago President Austan Goolsbee reiterated that he’d like to see more of the favorable inflation data published in the past several months but did not explicitly rule out the potential for an interest-rate cut in March.
“We’ve had seven months of really quite good inflation reports, right around or even below the Fed’s target,” Goolsbee said Monday in an interview on Bloomberg Television with Michael McKee. “So if we just keep getting more data like what we have gotten, I believe that we should well be on the path to normalization.”
Goolsbee repeated that he doesn’t want to commit to a specific decision with weeks to go before the Fed’s March meeting. He also said he doesn’t want to speculate on the possibility of a larger, half percentage point cut at some point.
Action Line: The Fed isn’t nearly as convinced as the market on inflation. So be careful. Become an inflation dodger, and when you want to talk about preparing your portfolio for inflation, I’m here. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter.
E.J. Smith - Your Survival Guy
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