Fed Governors Offer Differing Views on Rate Cuts in 2024

WASHINGTON–Some of the governors with the Federal Reserve have offered some additional insights into their thinking around the direction of rates in 2024, although there is some disagreement around how many rate cuts might take place and when.

Mary Daly

San Francisco Fed President Mary Daly said her outlook for interest rates and inflation was “very close” to the median of projections from 19 Fed officials who met last week and opted to leave rates steady, indicating as many as three rate cuts could take place in 2024.

“We’re acknowledging progress when progress is there,” Daly said in an interview with the Wall Street Journal, adding that it’s her view if inflation continues its steady decline of recent months, the Fed’s benchmark interest rate “will still be quite restrictive even if we [cut rates] three times next year.”

Daly told the Journal she is watching the effect that restrictive policy has on the labor market, noting that when the unemployment rate starts to rise it tends to go up by a lot and not by only a little bit. As a result, “we have to be forward looking and make sure that we don’t give people price stability but take away jobs,” she told the Journal.

‘In a Good Place’

In addition, Daly said she thought interest-rate policy was in a “good place” to achieve that result. In a notable shift, she said the Fed’s focus now needed to turn toward paying attention to both sides of its mandate.

“There is more work to do, and at this point, that work includes not only focusing on bringing inflation down to 2%…but also recognizing that we want to continue to do this gently, with as few disruptions to the labor market as possible,” she told the Journal.

No Urgency

But Raphael Bostic, president of the Atlanta Fed, said he sees no “urgency” to lower borrowing costs. According to separate reporting, his rationale is that inflation could yet remain stubbornly high over the next six months. Loretta Mester, John Williams and Austan Goolsbee, his counterparts in Cleveland, New York and Chicago, have made similar coments, the Journal noted.

Bostic predicted no more than two rate cuts in 2024, and none in the first six months.

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