Fed's Mester still expects 3 rate cuts in 2024 but it is a 'close call'

By Greg Robb

Cleveland Fed president says next meeting in May is too soon for a move

Cleveland Fed President Loretta Mester said Tuesday that she still expects three interest rate cuts in 2024, but added it was a close call.

"I still think three is reasonable, but it's close call," Mester told reporters after a speech.

Earlier, in her prepared speech, Mester said that May would be too soon for the first cut.

To be fair, the market is not expecting any Fed move at the next policy meeting on April 30-May 1. Odds of such a move are well below 10%, according to the CME Group's FedWatch tool.

Asked about the possibility of a cut in June, Mester said she wouldn't rule that out.

Mester spoke to reporters after a speech to the Cleveland Association for Business Economics.

In her prepared remarks, Mester said she wasn't flustered by the high inflation readings in the last two months, saying she had had already thought that the steady decline in inflation seen last fall would "slow down this year."

Mester said she expects inflation to continue to subside but said she needed to see more data to raise her confidence.

"I do not expect I will have enough information by the time of the FOMC's next meeting to make that determination," she said.

The Fed can begin to cut rates this year, if the economy evolves as she expects, Mester said.

She said she's revised up her forecast for economic growth to "a bit above 2%." She expects the unemployment rate will tick up only slightly.

The Cleveland Fed president again warned against cutting rates too quickly.

"At this point, I think the bigger risk would be to begin reducing the funds rate too early," Mester said.

Mester, who is a voting member this year, has been president of the Cleveland Fed for 10 years. She announced late last year that she will step down at the end of June.

-Greg Robb

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04-02-24 1418ET

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