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A pair of senior officials at the Federal Reserve on Friday said it’s too soon to talk about cutting interest rates and that it could be until late next year before the central bank begins to reduce borrow costs.
New York Fed President John Williams said interest rates are “at or near the right place” to get inflation under control and keep the economy growing.
Yet Williams said it is “premature” to discuss whether it is time to cut interest rates. Financial markets imply the Fed could cut rates as soon as March.
“We aren’t really talking about cutting interest rates right now,” Williams said in an interview on CNBC.
Atlanta Fed President Raphaeal Bostic chimed in later in the day to echo Williams’s remarks. He said he only expects a few rate cuts next year starting in the third quarter if inflation continues to slow as its current pace.
Both officials said the Fed has to remain on guard against a resurgence in inflation and make sure the increase in prices continues to slow.
The rate of inflation, using the consumer price index, has slowed to 3.1% as of November from a peak of 9.1% in 2022.
Williams said he was optimistic the recent improvement on inflation would continue and give the Fed the scope to consider rate cuts later next year.
“If we get the progress I am hoping to see on inflation and the economy, then of course it will be kind of natural to move monetary policy over a period of a few years to a more normal level,” he said.
The Fed on Wednesday left a key short-term interest rate unchanged at a range of 5.25% to 5.5%. The central bank had jacked the rate up from near zero since March 2022 to try to slow the economy enough to tame inflation.
Wall Street forecasters predict the Fed could cut rates at least two times and as many as seven times in 2024.
The Dow Jones industrial average
DJIA
and S&P 500
SPX
pulled back slightly on Friday. The yield on the U.S. 10-year note dipped to 3.91%.
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