Fed’s Mester and Daly expect 3 rate cuts this year

Fed officials Loretta Mester and Mary Daly signaled Tuesday that three rate cuts are still likely for 2024, with Mester hinting that a cut in June is a possibility.

“I don’t want to rule that out,” said Mester, who is president of the Cleveland Fed.

Mester noted the inflation picture had not "changed very much" despite some hotter-than-expected numbers at the start of 2024.

But she said she still wants to see more data to figure out whether those readings were "a detour or whether they’re the new kind of path."

"If the economy evolves as expected, then in my view it will be appropriate for the FOMC to begin reducing the fed funds rate later this year," Mester said in a speech to the National Association for Business Economics in Cleveland.

Daly, the president of the San Francisco Fed, also called three cuts in 2024 a "very reasonable baseline" while noting "we still have more work to do."

Cleveland Fed President Loretta Mester takes part in a panel convened to speak about the health of the U.S. economy in New York November 18, 2015. REUTERS/Lucas Jackson
Cleveland Fed president Loretta Mester. (Lucas Jackson/REUTERS) · REUTERS / Reuters

Mester and Daly became the latest Fed officials to offer assurances about the number of cuts in 2024 while at the same time making it clear the Fed is in no hurry to ease monetary policy.

Chicago Fed president Austan Goolsbee also told Yahoo Finance late last month that three rate cuts in 2024 are "in line with my thinking."

A new inflation report released Friday showed a slight cooling in the Personal Consumption Expenditures index, which is the Fed's preferred inflation gauge. That followed stickier readings in January and February from other gauges, such as the Consumer Price Index.

Fed Chair Jerome Powell said Friday that the new PCE report was "not as low as most of the good readings we got in the second half of last year, but it's definitely more along the lines of what we want to see," sticking to an assertion that inflation is still on a "bumpy path" to the central bank's goal of 2% during a question and answer session at a San Francisco Fed conference.

The Fed decided last month to hold interest rates steady and maintain projections for three rate cuts this year. Officials also raised their outlook for inflation and economic growth.

Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards

Mester said her projection for the number of rate cuts this year is in line with the median of three — maintaining what she told Yahoo Finance in an interview a little over a month ago.

The inflation picture, she added, "has not changed very much since the start of the year, because I had already thought that the pace of disinflation would slow down this year."