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On Thursday local time, Cleveland Fed President Loretta Mester ruled out the possibility of a rate cut in May but hinted at a possible cut in June. She stated that if there is clear evidence of the trajectory of the U.S. economy, the Fed might take action as early as June.
"If we get clear and convincing data before June, then I think if we know what action to take is correct, you will see the committee take action," Mester said in a media interview on Thursday.
Following Mester's remarks, the market reacted quickly, with interest rate swap contracts indicating that the probability of a Fed rate cut in June briefly climbed to around 65%, although it later receded.
Mester mentioned that it is unlikely for Fed officials to have enough (economic) information before the May meeting, but she stated that once there is more evidence regarding the potential direction of economic growth and inflation, they might take action at subsequent meetings.
Including Mester, Fed officials have indicated that they intend to keep interest rates stable until they have a better understanding of President Trump's immigration, trade, and regulatory policies. Several policymakers pointed out that there is significant uncertainty regarding how these policies will be implemented and how other countries and businesses will respond.
The Federal Reserve's next meeting will be held from May 6 to 7. The market generally expects that the Federal Reserve will remain on hold at that time.
Mester reiterated her view that officials need to remain patient to ensure they are moving in the right direction. She also indicated that the Fed has shown that it will act quickly once the direction of the economy is clear.
"For me, now is a good time to take it slow and ensure we are moving in the right direction," she said. "You have seen that if we need to act quickly, the Fed is not afraid to do so."
On Thursday, several Fed officials publicly discussed the issue of rate cuts.
Fed Governor Christopher Waller also stated that if the Trump administration reinstates aggressive tariff levels, U.S. companies may increase layoffs, and if the unemployment rate rises significantly, he would support a Fed rate cut.
Minneapolis Fed President Neel Kashkari also expressed concern on Thursday about the current uncertainty in the U.S. economy, which could ultimately lead to an increase in layoffs in the future. He stated that resolving trade disputes with major partners early would help eliminate the uncertainty hanging over the U.S. economy.
Morgan Asset Management recently stated that the market has underestimated the Federal Reserve's rate cut magnitude. The firm's global head of integrated strategies, Myles Bradshaw, indicated that Trump's tariff measures are more likely to hinder economic growth rather than stimulate inflation. He expects that, since the Federal Reserve has kept policies unchanged for a prolonged period, it will ultimately need to cut rates more aggressively.
On Thursday, the three major U.S. stock indices rose for the third consecutive trading day, partly driven by increased expectations of rate cuts. By the close, the S&P 500 index was up 2.03%, reporting 5484.77 points.
In recent weeks, U.S. stocks have fallen sharply due to U.S. tariff policies. In recent days, as President Trump's stance on tariffs has softened, U.S. stocks barely avoided a bear market. The S&P 500 index has rebounded from its low this month, but its decline for the year still exceeds 6%. Trump has repeatedly pressured the Fed to cut rates, and the market is also hoping for the Fed to step in to stabilize the market.
