"Need Not Change Monetary Policy Stance," Agree US Fed Officials

Officials of the U.S. Federal Reserve (Fed) emphasized a cautious monetary policy stance, indicating they are not in a hurry to change interest rates.

John Williams, President of the New York Federal Reserve Bank
Photo by Reuters Yonhap News

John Williams, President of the New York Federal Reserve Bank and considered the third most influential figure in the Fed, stated in an interview with major foreign media on the 16th (local time), "There are no indicators suggesting a need to change the current monetary policy stance," adding, "I do not expect a change in policy stance." He evaluated, "The current monetary policy is restrictive" and "is helping the economy find balance."

The U.S. core Consumer Price Index (CPI) for April, released the previous day, recorded a 3.6% increase, the lowest level in three years. On the same day, U.S. retail sales for April also fell short of expectations, further fueling hopes for an interest rate cut. Against this backdrop, President Williams' remarks are interpreted as indicating that while inflationary pressures are easing, more evidence is needed before initiating rate cuts.

President Williams welcomed the slowdown in indicators confirmed the previous day as a "positive development," but showed caution by saying, "I do not think we will gain the greater confidence needed to achieve the 2% price stability target in the near term." He further forecasted, "Inflation will enter the 2% range by the end of the year, reaching up to 2.5%, and will approach the 2% target next year."

Thomas Barkin, President of the Richmond Federal Reserve Bank
[Photo by Reuters Yonhap News]

On the same day, Thomas Barkin, President of the Richmond Federal Reserve Bank, also appeared on the economic media CNBC and said, "We believe we are on the right path," but noted that it will take more time to reach the 2% price stability target. He pointed out that inflationary pressures remain in the service sector and emphasized, "The key now is how long we need to maintain interest rates."

Regarding the CPI and retail sales data released the previous day, President Barkin evaluated that they "have not yet reached the levels the Fed aims to achieve" and that "consumer spending is 'good but not great'." He also mentioned, "Demand needs to decrease further to bring inflation back to target levels."

He also noted that although initial jobless claims remain historically low, they are gradually increasing, diagnosing that "the overall labor market is normalizing." According to the U.S. Department of Labor, the weekly new unemployment insurance claims released that day totaled 222,000, down 10,000 from the previous week.

Raphael Bostic, President of the Federal Reserve Bank of Atlanta
[Photo by Reuters]

Raphael Bostic, President of the Atlanta Federal Reserve Bank and a voting member of this year's Federal Open Market Committee (FOMC), also emphasized a cautious stance. In his speech that day, he welcomed the recent slowdown in indicators but said, "We will watch the May and June data to ensure the numbers do not rebound." He added that if inflation progress is confirmed as initially projected by the Fed, "it may be appropriate to cut rates by the end of the year."

Loretta Mester, President of the Cleveland Federal Reserve Bank and an FOMC voting member retiring in June, also said at an event held in Ohio that day, "It is prudent to maintain the current restrictive stance for a longer period." In an earlier interview with The Wall Street Journal (WSJ) this week, she stated, "The current monetary policy is in a good position" and "there is no need to raise interest rates." This aligns with Fed Chair Jerome Powell's remarks, who dismissed the possibility of rate hikes within the year amid concerns of inflation rebounding.

Loretta Mester, President of the Cleveland Federal Reserve Bank
[Photo by Reuters]

Bloomberg News reported, "Fed officials suggest they are not rushing to cut interest rates," adding, "Presidents Mester, Williams, and Barkin see that it will take longer for inflation to ease." According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds futures market on that day priced in about a 66% chance that the Fed will cut rates by at least 0.25 percentage points at the September FOMC meeting. This is slightly lower than the previous day, when the unexpectedly low CPI sharply increased expectations for rate cuts.