Remarks of Officials

We are getting closer to a rate cut. We just need to see it for longer to be confident that progress toward price stability will be sustained.

Interest rates will not be cut until there is greater confidence that inflation is moving consistently towards our long-term target of 2%. In fact, we think it will take longer to gain that confidence.

It will not be appropriate to reduce the target range for the federal funds rate until Fed officials have gained greater confidence that inflation is moving sustainably toward 2%. So far this year, the data have not given them that greater confidence.

Although inflation is expected to fall to the 2% target next year, there are still more uncertainties and risks. Taking into account geopolitical tensions and their possible impact on the supply chain, risks to our growth outlook remain tilted to the downside.

Monetary policy may still need to remain somewhat restrictive when inflation reaches 2%; monetary policy needs to maintain the progress achieved in the labor market and safeguard the victory over inflation.

Investments in the transformation of the euro area towards a climate-neutral economy will generate additional demand and can therefore lead to inflationary pressure.

Inflation data is stronger than expected, which has led investors and the Fed to reconsider whether rate cuts are needed this year. Inflation for January and February is likely to be revised upwards and upcoming price data for March is expected to show continued strong inflation.

Wage growth remains relatively strong at the moment, but appears to show signs of a gradual slowdown. Corporate profits are continuing to absorb the impact of wage increases.

The increase in population added to the short-term pressure on shelter inflation. The breadth of price pressures in services was viewed as an upside risk to inflation. The risk had diminished that restrictive monetary policy would slow the economy, and there was a risk of keeping monetary policy more restrictive than needed.

Driven by continued strong wage growth, inflation in the services sector is more persistent than goods inflation. Even though Nagel supports a rate cut in June, it does not imply there will be a series of rate cuts thereafter.