By Michael S. Derby and Howard Schneider
NEW YORK/WASHINGTON (Reuters) -The ranks of Federal Reserve officials saying there is no rush to cut interest rates continue to grow, with still-too-hot-for-comfort U.S. inflation a rising concern at home and casting a shadow over expectations for policy easing abroad as well.
"There's no clear need to adjust monetary policy in the very near term," New York Fed President John Williams told reporters on Thursday, a day after disappointingly strong consumer price inflation prompted traders and some analysts to predict a later start to Fed rate cuts, and likely fewer of them.
“Recent data suggest it may take more time than I had previously thought to gain greater confidence in inflation’s downward trajectory, before beginning to ease policy,” Boston Fed President Susan Collins said at a different venue in New York, adding that a strong labor market "also reduces the urgency to ease."
The two were among several U.S. central bankers voicing caution in recent days about moving too quickly to cut interest rates when inflation appears to be - at best - on what Fed Chair Jerome Powell has called a "bumpy" path back to the central bank's 2% annual target.
Inflation is proving to be a stickier problem than U.S. central bank officials had anticipated it would be just a couple of months ago, while other measures of the economy show little signs of slowing down. That combination has pushed the anticipated start of an easing cycle further down the road.
Richmond Fed President Thomas Barkin, who had already noted his concerns about the breadth of inflation being hard to "reconcile" with a near-term shift to rate cuts, said Thursday the latest numbers "did not increase my confidence" that price pressures were easing on a broader basis throughout the economy.
To be sure, both Collins and Williams, the vice chair of the central bank's rate-setting Federal Open Market Committee, believe rate cuts will be needed down the road, with Collins saying "later this year" and Williams saying "eventually."
And Williams said the recent "bumps" in inflation readings have not been unexpected, and that if there had been surprises it was over how fast price pressures eased last year.
SPILLOVERS
In Europe, where the labor market has begun to soften and growth is stagnating, central bankers left the policy rate unchanged on Thursday but signaled they remain on track to cut rates as soon as June.
But even as European Central Bank President Christine Lagarde asserted the ECB's independence from the vagaries of U.S. inflation, sources told Reuters the ECB could pause after June to await more clarity from the Fed on its rate decisions.
Meanwhile IMF chief Kristalina Georgieva said continued higher U.S. interest rates is "not great news" for the rest of the world because they act as a magnet for global financial flows and leave the rest of the world "somewhat struggling."
U.S. consumer price index data came in stronger than expected in March, prompting a broad resetting of expectations for when the Fed will be able to cut rates this year. Financial markets are now pricing in a July or September start to Fed rate cuts, versus an earlier view of June.
Economists at a string of Wall Street firms, including Goldman Sachs, Bank of America, Barclays and Wells Fargo, also shifted their calls after the CPI data, predicting just one or two rate cuts for the year, instead of the previous three moves. A few economists now say there may be no reductions in U.S. borrowing costs until 2025.