Source: AFP
The speed with which U.S. inflation is falling means it will likely be appropriate for the Federal Reserve to start cutting interest rates in the summer, a senior Fed official said on Thursday.
The U.S. central bank recently made three rate cuts this year, but did not say when it would begin cutting its key lending rate, sparking speculation in financial markets.
Key to her decision is whether inflation – falling sharply since hitting a multi-decade high in 2022 – continues to approach the Fed’s long-term target of two percent.
“A year ago, I expected the first rate cut to be appropriate probably at the end of this year at the earliest,” Atlanta Fed President Rafael Bostic said at a conference in the city on Thursday.
“The acceleration of the fall in inflation made me take it forward,” said Bostic, who is one of 12 voting members of the Fed’s rate-setting committee this year.
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![](https://images.yen.com.gh/images/d6f0a508e4c6b631.jpg?impolicy=cropped-image&imwidth=256)
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“It would probably be appropriate, if things go as I expect them to, to start lowering rates in the summer,” he said, but noted that he would remain “data dependent.”
Source: AFP
Bostic’s remarks came shortly after new data showed that the Fed’s favored inflation measure continued to decline, albeit with some cause for concern.
The personal consumption expenditures (PCE) price index rose at an annual rate of 2.4 percent in January, down 0.2 percentage points from December, the Commerce Department said in a statement.
But so-called “core” inflation, which strips out volatile food and energy costs, rose 0.4 percent from the previous month, suggesting a pick-up in core inflation from December to January.
Bostic’s prediction of a DST reduction appears to be in line with current views in financial markets about when the Fed might start cutting interest rates.
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![](https://images.yen.com.gh/images/bd839ddc69d02324.jpg?impolicy=cropped-image&imwidth=256)
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According to CME Group data, futures traders are currently assigning a nearly 70% chance that the Fed will cut interest rates by June 12.
The probability rises to more than 85 percent by the end of July, suggesting a summer cut is more or less built into traders’ forecasts.
Source: AFP