What Fed Has Said on Rate Cuts, Inflation, Jobs

Estimated read time 4 min read
  • Fed officials have said rate cuts are coming soon, but inflation must still cool further.
  • Markets are placing the greatest odds on a rate cut in June, fed fund futures show. 
  • Policymakers have said the risk of waiting too long may be lower than acting too soon.

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Federal Reserve officials have said interest rate cuts are coming this year, but there’s not an exact date in their outlook just yet.

Markets are pricing in 64% odds of a rate cut in June, according to CME’s FedWatch Tool, even as Jerome Powell and his colleagues remain cautious on inflation, jobs, and the economy.

Those expectations were little changed after Tuesday’s inflation report, which showed CPI came in hotter than expected in February. The reading subtracted 5 basis points from market pricing of Fed rate cuts in 2024, which remains much lower than the 25-basis-point swing in market pricing after the January CPI report, according to Bank of America data.

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Bank of America market pricing on Fed rate cuts chart

Market expectations for rate cuts were little changed after the February CPI report.

Bank of America

Meanwhile, Capital Economics strategists said the fresh inflation reading further muddied the inflation and interest rates outlook for the months ahead.

“We have already pushed back our forecast for the first cut to June, but even that is starting to look less certain – and will depend on better news on inflation over the next three months,” strategists at Capital Economics wrote in a Wednesday note. “As a result, the Fed’s policy statement next week will probably be broadly unchanged from the previous one. Inflation will still be described as ‘elevated’ and, crucially, it will reiterate that the FOMC is still seeking ‘greater confidence that inflation is moving sustainably toward 2%’ before lowering interest rates.”

Here’s what a handful of central bankers have been saying since the last Federal Open Market Committee meeting in January that could hint at what comes next.

Monetary policy

  • Jerome Powell, March 6: “If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.” 
  • Neel Kashkari, March 6: “If we have a run rate that’s very attractive, people have jobs, businesses are doing well, inflation is coming down, why do anything [with rates]? I would want to see the argument for why we think we’re actually tamping down the economy if the economy is ongoing in such a healthy way.”
  • Michelle Bowman, February 7: “Should the incoming data continue to indicate that inflation is moving sustainably toward our 2 percent goal, it will eventually become appropriate to gradually lower our policy rate to prevent monetary policy from becoming overly restrictive. In my view, we are not yet at that point. Reducing our policy rate too soon could result in requiring further future policy rate increases to return inflation to 2 percent in the longer run.”
  • Patrick Harker, February 22: “I believe we may be in the position to see the rate decrease this year. But I would caution anyone from looking for it right now and right away. We have time to get this right, as we must.”


  • Raphael Bostic, March 4: “I need to see more progress to feel fully confident that inflation is on a sure path to averaging 2% over time.”
  • John Williams, February 28: “I expect inflation to continue its return journey to 2%, although there will likely be bumps along the way…to be specific, I expect PCE inflation to be around 2-2.25% this year and 2% next year.”
  • Christopher Waller, February 22: “I see little reason to expect that inflation will run below 2% for an extended period given the strong economic fundamentals we are observing in GDP and employment.”

Labor market

  • Jerome Powell: March 6: “The labor market remains relatively tight, but supply and demand conditions have continued to come into better balance.”
  • John Williams, February 28: “I expect GDP growth to slow to about 1.5% this year, and the unemployment rate to rise modestly, peaking around 4%.”
  • Christopher Waller, February 22: “I will be looking for signs of continued loosening in the labor market, which by most measures is still considerably tighter than it was before the pandemic.”