With regard to inflation, as we all saw,
the promising disinflation of the second half of 2023 unceremoniously halted
through the first quarter of 2024. Now, I had expected bumps in the road,
but the Q1 2024 bump threatened to become a hill to climb.
Yet, while the lack of progress toward the inflation target was concerning,
inflation did not reignite. And while I remain very attentive to
inflation risks, the latest inflation data have been quite promising that
progress on disinflation has resumed. Last week, CPI inflation released for
May was very welcome and the kind of price data I want to see, and I think we
all want to see more of. But I would add the caveat that our
inflation target is the PC price index, not the CPI. The May reading of which is
not due for another 11 days. If the higher inflation in the first
quarter was a bump on the road, I want

to make sure that the lower inflation we
are seeing so far in the second quarter is not a pothole.
So I remain focused on seeing inflation return to a clear on a clear path and
return to our path toward our target of 2% annually.
Inflation is way down from where it was a year ago, or if the high inflation
readings between January and March factored in.
Progress in recent months has been modest.
So I believe that the current policy interest rate, which has been held
steady for nearly 11 months, will continue to serve us well for a bit
longer, holding us from restrictive territory to bring inflation back to the
target and to mitigate those upside risk.
So over the ensuing months, I continue to closely monitor the data, both hard
and soft on inflation, labor markets, and economic activity.
And I will be asking whether it is or is not the right time to decrease the
policy rate. We're not.
Time will be.

Exactly. I just don't know at this point. I have a forecast for inflation, employment, and economic activity slowing, but above-trend growth, a modest rise in the unemployment rate, and a long glide path to target for inflation. If all of that happens to be as forecasted, I think one rate cut would be could be appropriate by year-end, as well as a medal for myself for being the best economic forecaster ever. Because look, any forecast remains just that. It's a forecast. I think this is important to emphasize. It's a forecast. It is not a locked-down commitment. My commitment is to remain data-dependent because this is how we get through this uncertainty and make sure inflation returns to target sustainably. Indeed, I see two cuts or none for this year is quite possible if the data break one way or another.

Harker Says One Fed Rate Cut in 2024 Is Appropriate

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