Federal Reserve policymakers made it clear on Tuesday that they're leaning towards a cautious approach. They said that the central bank should "wait several more months" before reducing interest rates until there's more evidence that inflation is steadily progressing toward the targeted 2 per cent, as per a report by Reuters.
"In the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy," Fed Governor Christopher Waller told the Peterson Institute for International Economics in Washington.
"I need to see a few more months of inflation data that looks like it is coming down," Cleveland Fed President Loretta Mester said on Tuesday, at an Atlanta Fed conference. She will be attending her last Fed meeting in June before retiring.
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"We're in a period when patience really matters," Boston Fed President Susan Collins said. "I think the data has been very mixed and it's going to take longer than I had previously thought," she added.
While the policymakers have taken a cautious tone, they have stated that there is a need for the economy to cool down. Since mid-last year, the Federal Reserve has maintained its benchmark policy rate within the range of 5.25 per cent to 5.50 per cent. Despite some positive developments in inflation moving closer to the expected 2 per cent target, the Fed continues to incline towards a cautious stance.
While there are now some promising signs of improvement in the labor market and inflation trajectory, the Fed is proceeding with vigilance. This was quite visible in Fed Chair Jerome Powell's words in the last official FOMC meeting, where he said that it "will take longer than previously expected" for a rate cut decision.
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