Fed insider says talk of a March rate cut is premature

Federal Reserve Bank of New York president John Williams said it’s too early for officials to begin thinking about cutting rates as soon as March as they consider whether policy is restrictive enough to get inflation back to 2 per cent.

“We aren’t really talking about rate cuts,” Williams said on Friday in an interview on CNBC. He noted it’s “premature” to be thinking about cutting interest rates in March.

“As chair Powell said, the question is: Have we gotten monetary policy to a sufficiently restrictive stance in order to ensure that inflation comes back down to 2 per cent? That’s the question in front of us,” he said.

The Fed signalled a pivot earlier this week toward reversing the steepest interest-rate hikes in a generation, with officials issuing forecasts for a series of cuts next year.

While chairman Jerome Powell said on Wednesday the central bank is prepared to resume rate increases should price pressures return, he also said the topic of easing came up at their meeting this week.

Powell’s lack of pushback during his press conference against growing investor expectations for 2024 rate cuts ignited one of the biggest post-meeting rallies in recent memory. It was the best Fed day across assets in almost 15 years, according to data compiled by Bloomberg.