Fed officials comment on inflation ahead of key PCE data

Three monetary policymakers contributed their remarks and statements about the labour market, inflation and interest rate policy in the United States ahead of the PCE data that is expected on Friday.

Federal Reserve Bank of Atlanta President Raphael Bostic noted on Thursday during an interview with Fox Business that the Atlanta Fed head doesn’t believe further rate hikes should be required to reach the Fed’s 2% annual inflation target. According to Bostic, the inflation outlook will come down very slowly and the Fed needs to stay in a restrictive stance. Bostic also doesn’t think a rate hike will be required to reach the 2% goal.

“The economy continues to grow, but it’s growing at a slower pace”, he said adding that “I expect to reach the inflation goal without an unemployment jump”.

Secondly; president of the Federal Reserve Bank of Chicago Austan Goolsbee noted on Thursday that housing inflation remains a key sticking point in price growth, and that the US labor market remains quite strong. Chicago Fed President Goolsbee noted that inflation could fall without a meaningful increase in unemployment, stressing that the “issue now is whether the US will face a “traditional” trade-off between inflation and unemployment”.


Austan Goolsbee also noted that research is “quite clear” across countries and time that political interreferences in monetary policy creates worse economic outcomes.

“Extremely important” that the Fed hit its 2% inflation target since it has centered expectations around that number”, Austan Goolsbee said adding that “The strongest part of the economy right now is the job market, and overall, the US has had a strong post-COVID recovery; there are industries, parts of the country, and people that are “hurting” in the current economy and the central bank is not trying to return the price level to where it was; that would require deflation”.

Goolsbee spoke also about housing inflation that is still “well elevated” compared to pre-COVID levels; will be hard to get to 2% unless this changes. Meanwhile, he is still optimistic that housing inflation will slow down”.

Thirdly; Federal Reserve Bank of New York President John Williams noted on Thursday that, while inflation is still too high, he believes Fed policy is positioned to slowly get price growth back to the Fed’s 2% annual target.

Williams expects unemployment at 4% by the end of the year. He also expects the US economy to grow 2%-2.5% in 2024. He believes that Fed policy is well-positioned to get inflation back to the 2% target.

“Inflation is still too high, but should moderate over the second half of 2024”, Williams said adding “I expect inflation at 2.5% this year, closer to 2% next year”. He mentioned a recently dearth of progress on lowering inflation, stressing that the Fed will watch all of the data to make decisions on monetary policy.

According to Williams, the US monetary policy remains restrictive on economy activity and risks to achieving the Fed mandates are moving into better balance. The wage gains are still too high relative to the 2% inflation goal and the economy is moving into better balance. Williams also added that inflation expectations data has been stable and that he feels god about where monetary policy is now.

“Amid uncertainty about when rate cuts start, it is unclear how much easing will be needed. Friday’s PCE is important, but it’s just one piece of data”, Williams stressed.

The USD Index came under pressure and retreated from weekly highs past the 105.00 hurdle against the backdrop of declining US yields. On May 31, all the attention will be on the release of inflation data tracked by the PCE along with Personal Income and Personal Spending.