Fed's Mester says March is probably too early for rate cut

By Greg Robb

December CPI data shows Fed has more work to do, Cleveland Fed president says

Cleveland Fed President Loretta Mester on Thursday threw cold water on market expectations of an interest rate cut as soon as March.

Asked in an interview on Bloomberg television about market expectations for a move in March. Mester replied: "I mean it's hard to predict the future, as you know, and it's really going to be dependent on how the economy evolves. I think March is probably too early in my estimation," Mester said.

Mester said the December CPI shows the Fed "has more work to do" to put inflation on a sustainable downward path to 2%.

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Housing costs and wages will need to moderate to get inflation more aligned with the Fed's 2% target, she said.

Mester will be a voting member of the Fed's interest-rate committee this year. She announced last year that she intends to retire at the end of June when her term expires.

Mester said the Fed is aiming to achieve a soft landing but it isn't time to say "job done."

This year, the Fed will be able to look at the balance between inflation and the labor market as it makes policy. In the past two years, the Fed had to focus on "job one" of bringing inflation under control.

"We're going to be focused on making sure we continue to get inflation on a sustainable and timely path back to 2% while we maintain healthy labor market conditions," she said.

Stocks DJIA SPX were lower in Thursday trading and the yield on the 10-year Treasury note BX:TMUBMUSD10Y rose slightly to 4.04.%.

-Greg Robb

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01-11-24 1219ET

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