Current:Home > NewsSurpassing:Federal Reserve officials caution against cutting US interest rates too soon or too much -Wealth Empowerment Zone
Surpassing:Federal Reserve officials caution against cutting US interest rates too soon or too much
Ethermac View
Date:2025-04-09 04:00:19
WASHINGTON (AP) — Several Federal Reserve policymakers warned Thursday against cutting U.S. interest rates too soon or Surpassingby too much in the wake of recent data showing inflation stayed unexpectedly high in January.
Their comments echoed the minutes from the Fed’s last meeting in January, released Wednesday. The minutes showed that most central bank officials were concerned about the risk that moving too fast to cut rates could allow inflation to rise again after it has declined significantly in the past year. Only “a couple” of policymakers worried about a different risk: that keeping rates too high for too long could slow the economy and potentially trigger a recession.
Christopher Waller, a member of the Fed’s influential board of governors, titled a written copy of remarks he delivered Thursday, “What’s the rush?”
“We need to verify that the progress on inflation we saw in the last half of 2023 will continue and this means there is no rush to begin cutting interest rates,” Waller said.
Inflation has fallen from a peak of 7.1% in 2022, according to the Fed’s preferred measure, to just 2.6% for all of 2023. In the second half of last year, prices grew just 2% at an annual rate, matching the Fed’s target.
Still, consumer prices excluding the volatile food and energy categories rose from December to January by the most in eight months, an unexpectedly rapid increase. Compared with a year earlier, they were up 3.9%, the same as the previous month.
Waller said that January’s figures may have been driven by one-time quirks — many companies raise prices at the start of the year — or they may suggest “inflation is stickier than we thought.”
“We just don’t know yet,” he continued. “This means waiting longer before I have enough confidence that beginning to cut rates will keep us on a path to 2% inflation.”
Many economists have expected the Fed would implement its first cut in May or June, though Waller’s comments could change those predictions. In December, Fed officials forecast that they would cut their benchmark rate by a quarter-point three times this year. After a rapid series of increases in 2022 and 2023, the rate is now at about 5.4%, a 22-year high.
Cuts in the Fed’s rate typically reduce borrowing costs for homes, autos, credit cards, and a range of business loans.
Waller said he still expects inflation to keep falling and thinks the Fed will be able to reduce the rate this year. But he noted that the risk is greater that inflation will remain stubbornly above the Fed’s 2% goal than it will fall below that figure.
With hiring strong and the economy growing at a solid pace — growth was 3.3% at an annual rate in the final three months of last year — Waller said the Fed can take time to decide when it should cut.
Separately, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, also expressed caution about cutting rates too soon.
“I believe that we may be in the position to see the rate decrease this year,” he said. “But I would caution anyone from looking for it right now and right away.”
And Fed Vice Chair Philip Jefferson warned against cutting rates too deeply in response to the positive economic news. As vice chair, Jefferson works closely with Chair Jerome Powell in guiding the Fed’s policy.
“We always need to keep in mind the danger of easing too much in response to improvements in the inflation picture,” Jefferson said. Easing refers to cuts in the Fed’s short-term interest rate. “Excessive easing can lead to a stalling or reversal in progress in restoring price stability.”
Still, some Fed officials have downplayed the unexpectedly elevated inflation figures in January.
Last week, Mary Daly, president of the San Francisco Fed, said January’s inflation data “has not shaken my confidence that we are going in the right direction.”
veryGood! (642)
Related
- Euphoria's Hunter Schafer Says Ex Dominic Fike Cheated on Her Before Breakup
- Gypsy Rose Blanchard Reveals the Lowest Moment She Experienced With Her Mother
- FBI arrests 3 in Florida on charges of assaulting officers in Jan. 6 insurrection
- Cumbersome process and ‘arbitrary’ Israeli inspections slow aid delivery into Gaza, US senators say
- Retirement planning: 3 crucial moves everyone should make before 2025
- Defense Secretary Lloyd Austin hospitalized after complications from recent procedure
- Jordanian army says it killed 5 drug smugglers in clashes on the Syrian border
- What are the benefits of black tea? Caffeine content, more explained.
- US wholesale inflation accelerated in November in sign that some price pressures remain elevated
- The US sees a drop in illegal border crossings after Mexico increases enforcement
Ranking
- House passes bill to add 66 new federal judgeships, but prospects murky after Biden veto threat
- Wrexham’s Hollywood owners revel in the team’s latest big win in FA Cup
- NFL winners, losers of Saturday Week 18: Steelers could sneak into playoffs at last minute
- Offensive lineman Seth McLaughlin commits to Ohio State after leaving Alabama for transfer portal
- Man charged with murder in death of beloved Detroit-area neurosurgeon
- Massive California wave kills Georgia woman visiting beach with family
- From eerily prescient to wildly incorrect, 100-year-old predictions about 2024
- These Photos of the 2024 Nominees at Their First-Ever Golden Globes Are a Trip Down Memory Lane
Recommendation
Taylor Swift Cancels Austria Concerts After Confirmation of Planned Terrorist Attack
Trevor Lawrence injury updates: Jaguars QB active for Week 18 game vs. Titans
Wayne LaPierre to resign from NRA ahead of corruption trial
Bulgarians celebrate the feast of Epiphany with traditional rituals
Meet 11-year-old skateboarder Zheng Haohao, the youngest Olympian competing in Paris
How the Golden Globes is bouncing back after past controversies
The Bloodcurdling True Story Behind Killers of the Flower Moon
Michael Bolton reveals he had brain tumor surgery, taking a break from touring