Fed signals 'Patience' on rate cuts as data disappoints

WASHINGTON: A week of disappointing U.S. economic data, including stronger-than-expected inflation and weakening spending, has Federal Reserve policymakers doubling down on their wait-and-see approach to interest rate cuts this year, but not discouraged.

The latest bit of bad news came early on Friday in the form of a 0.5% month-on-month surge in January's producer price index excluding food and energy, potentially undoing some of what policymakers have called "remarkable" progress on inflation.

That followed on reports earlier this week showing that consumer prices rose more than expected last month, even as a big drop in retail sales and a slide in factory production amid severe cold in some parts of the country raised questions about economic momentum.

Fed policymakers speaking on Friday took it all in stride, seeing continued if "bumpy" progress toward the Fed's 2% goal and continued, if cooling, labor market strength that leaves the economy on track to a soft landing.

"It has not shaken my confidence we are going the right direction," San Francisco Federal Reserve Bank President Mary Daly told a roomful of economists in Washington on Friday, of the run of recent data. "It's about how quickly are we going to go there."

Daly said that while there's still "work to do" on inflation - a phrase policymakers lately have used to signal a longer hold at current rates, rather than any further rate increases - she continues to see three quarter-point cuts to the Fed's policy rate this year as a "reasonable" path forward.