US market today | Fed officials are signaling patience with interest rates amid inflation concerns

The Federal Reserve is likely to leave interest rates unchanged for now, as indicated by two central bank policymakers. Officials are awaiting further economic data on jobs and inflation, an AFP report said.Cleveland Fed President Beth Hammack suggested current interest rate levels could be maintained for an extended period, citing a cautiously optimistic outlook for economic activity. Noting that the banking system is still on solid footing, she stressed the need to monitor how recent interest rate cuts and government borrowing are affecting market dynamics, according to a Reuters report.

Dallas Fed President Lorie Logan emphasized that the labor market and inflation trajectory will determine the need for future interest rate adjustments. While Logan acknowledged the potential for further rate cuts if the labor market cooled significantly, she expressed concern that inflation remains stubbornly above the central bank’s two percent target, the report said.

Hammack and Logan recently began their respective one-year terms as voting members of the Fed’s Federal Open Market Committee, which sets monetary policy. The committee consists of twelve voting members, including seven Fed governors, the New York Fed president and four other Reserve Bank presidents.

In recent months, the Fed has postponed further rate cuts, despite cutting rates three times last year. These decisions came as unemployment stabilized and the economy showed steady growth. The next policy meeting is scheduled for March, with markets expecting officials to maintain current rates.

Hammack emphasized that a stable interest rate on funds would support continued economic growth while allowing policymakers to observe the effects of previous interest rate cuts. She indicated that downside risks to the labor market have diminished, but warned that inflation remains high and may approach 3% this year.

Logan placed an emphasis on monitoring market activity on government bonds, particularly the heavily leveraged ‘basic trading’ used by hedge funds, which could pose vulnerabilities if financial stresses arise. She also noted tentative signs that inflationary pressures may be easing, including declining costs for housing services and subdued near-term inflation expectations among businesses. However, Logan warned that tariff effects, fiscal stimulus, deregulation and technological developments could continue to fuel price increases, the Reuters report showed. Both officials indicated that the Fed’s current policy stance is aimed at balancing its dual mandate of maximum employment and price stability. While further rate cuts remain possible depending on economic developments, the prevailing view among these policymakers is to proceed patiently and monitor the data before making further adjustments.