Fed officials split on need for cut

Two senior officials back different view after chair’s speech

Two Federal Reserve officials laid out the case for a possible interest-rate cut just days after chairman Jerome Powell said there was no reason to move in either direction.

Two other US central bankers sounded more comfortable with the current policy stance.

St. Louis Federal Reserve Bank President James Bullard and Chicago Fed President Charles Evans, both policy voters this year, expressed caution Friday over weak prices and said the central bank may have to act to lift inflation out of a persistently low trend.

That contrasts with Powell’s dismissal of the most recent dip in inflation readings as temporary during his press conference on Wednesday after the Fed held rates steady, pushing back against pressure for a cut from traders and President Donald Trump. Remarks later on Friday by vice-chairman Richard Clarida and Cleveland Fed chief Loretta Mester, who is

not a voter this year, were more in line with Powell.

The chairman had said officials wouldn’t ignore inflation that ran too low for too long below their 2 per cent target, but argued price pressures should be supported by a healthy economy and the lowest unemployment in nearly 50 years.

‘Open to a rate cut’

Data released Friday showed surprisingly strong hiring and cooler-than-projected wage gains, suggesting a hot labour market can extend its run.

Inflation excluding food and energy prices slowed to 1.6 per cent in the 12 months through March compared with 1.95 per cent in December.

Bullard said he is prepared to wait through the summer. But if inflation expectations “are still too low and actual inflation doesn’t seem to be picking up then I think the level of my concern would get more intense,” he said in an interview. “I am open to a rate cut to try to combat this.”

Evans, answering questions after a speech in Stockholm, said he would “not be afraid to act” if a rate cut was warranted by the inflation outlook.