WASHINGTON – US central bankers are looking through recent data showing price pressures rebounded in January, and are focusing instead on overall progress on inflation that they say will likely set the table for interest rate cuts later in 2024.

“I expect things are going to be bumpy,” Atlanta Federal Reserve Bank president Raphael Bostic said on Feb 29 during an interview at a banking conference after a Commerce Department report showed that the core personal consumption expenditures price index rose more than 5 per cent on an annualised basis, sharply higher than the previous several months of readings.

But compared with a year ago, the measure of underlying inflation ticked down to 2.8 per cent from 2.9 per cent in December. The six-month and three-month annualised inflation rates are even closer to the Fed’s 2 per cent target.

Dr Bostic said his eye remains on the longer-term trends and repeated his view that he sees the Fed beginning to cut rates “in the summer time”, if the economy evolves as he expects.

Fed policymakers have kept the policy rate in the range of 5.25 per cent to 5.5 per cent since July, and in December, policymakers as a group anticipated that they would likely end up cutting rates to the 4.5 per cent to 4.75 per cent range by the end of 2024.

Cleveland Fed president Loretta Mester, speaking to Yahoo! Finance later in the day, said having three rate cuts is still her baseline view.

“Right now, that feels about right to me if the economy evolves as I anticipate it will,” Dr Mester said, adding that she, like her fellow policymakers, will pencil in fresh economic forecasts when they next meet in about three weeks.

She said she expects employment and wage growth to cool in the coming months, easing price pressures and giving her more assurance that inflation is headed sustainably back to the Fed’s goal.

Chicago Federal Reserve Bank president Austan Goolsbee also shrugged off January’s inflation data as indicative of a setback, and said he believes the disinflationary effect of 2023’s supply chain improvements and immigration-fuelled rise in labour supply has a “decent chance” of continuing into this year.

That, he said, means there is still scope for the United States economy in 2024 to continue on what he has dubbed the “golden path” of falling inflation alongside a robust labour market and economic growth, a historically unusual pattern.

“Rates are pretty restrictive,” Dr Goolsbee said in an event sponsored by Princeton University. “The question is, how long to remain this restrictive.”

If inflation continues to come down, he said, the Fed’s policy rate will become increasingly restrictive in “real” terms even if it is held steady.

Eventually, that could hurt the labour market, he added.

US unemployment, at 3.7 per cent, is only a few tenths of a percentage point above where it was when the Fed began its rate hike campaign in March 2022. REUTERS