Federal Reserve officials are signaling we aren’t out of the woods just yet when it comes to inflation.

In a flurry of recent media appearances, policymakers have emphasized that it's crucial to keep interest rates steady despite inflation progress to ensure long-term economic stability.

“The real issue right now is: when are we going to be certain that inflation is clearly on the path of 2%? I think it’s going to take a while before we’ll know that for sure,” said Atlanta Federal Reserve Bank President, Raphael Bostic, in a recent interview with Bloomberg.

His prediction was that inflation would continue to fall throughout this year and into 2025 before hitting the elusive 2% target.

Cleveland Federal Reserve President Loretta Mester echoed Bostic’s cautious optimism in her interview with Bloomberg on Monday. “Inflation is going to come down, I just don’t think it's going to come down quickly,” she said.

Mester started with the good news: the economy performed stronger than she expected and the April Consumer Price Index Report is "welcome news" in the fight against inflation.

According to the report, consumer prices rose just 3.4% over the last 12 months, down from a 3.5% increase in March. Still (and now for the bad news), Mester said it’s ‘too soon to tell’ whether it’s the right time to cut interest rates.

Mester added she will likely reduce her interest rate projections for 2024 before the Federal Open Market Committee in June.

Federal Reserve Vice Chair Philip Jefferson has also weighed in.

Speaking to the Mortgage Brokers Association, Jefferson noted that elevated borrowing costs have reduced mortgage demand, and pandemic-era rent increases are still affecting current rent prices.

This could keep housing inflation high for some time. Jefferson emphasized that the Fed needs to gather more evidence to ensure that inflation is on a clear downward trajectory.

“We look at the totality of the data to set policy and achieve the objectives given to the Fed by Congress: maximum employment and price stability,” Jefferson said.

Jefferson further explained that while recent data on consumer prices and retail spending are encouraging signs, the Fed remains cautious due to the higher-than-expected inflation readings in the first quarter.

He reiterated that the Fed's restrictive monetary policy needs more time to take full effect.

To cut or not to cut, that is the question and it sounds like the latter. The Fed will hold its next policy meeting between June 11-12.

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