Three Federal Reserve officials said the pace of interest-rate cuts will depend on incoming economic data, suggesting the path to lower borrowing costs may look different than in previous rate-cutting cycles.

Boston Fed President Susan Collins and New York’s John Williams said the Fed’s first rate cut will likely be appropriate “later this year,” while Atlanta’s Raphael Bostic said he’s currently penciling in a cut for sometime this summer. But the policymakers also offered some insight into how the Fed will assess the timing of future rate reductions.

“With respect to rate cuts and pace, it’s got to be driven by economic conditions, as well as inflation,” Williams told reporters Wednesday, adding that in the past officials have gotten into regular patterns. “It’s not going to be calendar based, and not be on a specific fixed schedule, but focused on the data.”

Policymakers have repeatedly said they want to see more evidence inflation is firmly on a downward path before cutting rates, especially given the hotter-than-expected consumer price figures released earlier this month. But the comments indicate officials will also rely on economic data to drive the pace of such cuts.

“We always say we will be data dependent,” Bostic said Wednesday. “The data will be the guide that tells us how much or how fast or when we should actually move our policy.”

In the past, the Fed has typically lowered interest rates quickly, often in response to a recession. This time around, the fundamentals of the economy look much different.

Consumers have continued to spend despite higher borrowing costs, and the unemployment rate remains anchored at a historically low 3.7%. That’s virtually the same as when the central bank began ratcheting up rates in March 2022.

While several policymakers — including Bostic — have said they expect inflation to continue to fall to the central bank’s 2% goal, they do expect the path to be bumpy from month-to-month. Officials will get an updated look at inflation Thursday with the release of the Fed’s preferred price gauge.

“I still see signs that suggest that this is not going to be a fast march to 2%,” Bostic said. “As long as we are going to get there and we are not seeing bad things happen on the side I am comfortable being patient.”

Policy Path

US central bankers next meet on March 19-20, and are expected to keep their benchmark lending rate in a range of 5.25% to 5.5%. Futures markets have priced in a probable rate cut in June, with almost no chance of a reduction next month. Fed officials penciled in three quarter-point cuts for 2024 in their last set of projections in December — an estimate Williams said is still a “reasonable starting point” for rate cuts this year.

“It will likely become appropriate to begin easing policy later this year,” Collins said Wednesday. “When this happens, a methodical, forward-looking approach to reducing rates gradually should provide the necessary flexibility to manage risks, while promoting stable prices and maximum employment.”

Collins also said some further deceleration in inflation will likely require further slowing of economic activity.

“But there is considerable uncertainty about when, and by how much, activity is likely to slow,” Collins said, citing strong job growth in January and a consumer price index reading for that month that was “on the high side.”