Fed president says March ‘probably’ too early for rate cut after hot inflation report

The rocky path of inflation back to the Federal Reserve’s 2% target rate reflected in the latest Consumer Price Index figures means that it is likely too soon for the central bank to cut its policy rate in March, Cleveland Fed President Loretta Mester said on Thursday. “I think March is probably too early in my estimation for a rate decline because I think we need to see some more evidence,” Mester said in an interview with Bloomberg TV.

“I think the December CPI report just shows there is more work to do and that work is going to take restrictive monetary policy.” The central bank in December forecast cuts to its benchmark overnight lending rate this year but the timing and pace of them remains in flux as officials parse economic data.

Mester cited the need for the goods, housing and shelter categories in the inflation measurement to “see more progress” as well as for wage gains to slow. Earlier on Thursday, the difficulty in bringing inflation back down was underscored by a stronger than expected reading on price pressures as Americans paid more for shelter and healthcare.

Investors are still maintaining bets though that the Fed will begin to cut its policy rate at the following meeting in March, according to an analysis of fed funds futures contracts by the CME Group. That inflation data followed the closely watched monthly jobs report last Friday, which showed a still resilient labor market, with employers adding 216,000 jobs in December and annual wage growth edging up.

The Fed’s rate setting committee next meets on Jan. 30 Jan 31, when the central bank is expected to keep its policy rate unchanged in the current 5.25% 5.50% range..