In nearly 40 years working for and helping lead the Federal Reserve, Cleveland Fed President Loretta Mester was part of a revolution that saw the U.S. central bank offer ever more detailed and plentiful commentary on the economy and monetary policy. As she heads towards mandatory retirement in June, the Cleveland Fed chief has a parting thought: With the economy in flux following the COVID-19 pandemic and with uncertainty surrounding even basic aspects of how things work, precision may be an enemy. "Markets certainly want to know exactly ... 'when are you going to cut rates?' That's what they focus on," Mester, 65, said in an interview with Reuters on the sidelines of an Atlanta Fed conference this week.
In an extraordinary turnabout in just five months, financial markets now fully price just one quarter-point interest rate cut from the Federal Reserve this year - compared to the six built into futures prices at the start of 2024. The good news is that's largely down to the sheer strength of the ongoing U.S. expansion - the bad news is that very strength makes it harder for the Fed to see inflation hitting its target and keeps it hesitating on a first rate cut. Thursday's reversal of fortunes on Wall St reflected all that clearly, with surprisingly strong business and labor market updates seeding the worst day of the month for S&P500 despite Nvidia's near 10% surge on another blowout earnings report infused by the artificial intelligence boom.
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