Federal Reserve officials speak out intensively: Not yet ready to support interest rate cuts at the July meeting

Author: He Hao

Source: Wall Street Journal

On Thursday, several Federal Reserve officials spoke, clearly stating that more observation is needed over the next few months to confirm that price increases caused by tariffs will not sustainably drive up inflation, and they are not yet prepared to support interest rate cuts at the next meeting.

Recently, the remarks of two Federal Reserve governors appointed by Trump during his first term, Waller and Bowman, have drawn attention. Both indicated that if inflation remains controlled, they would be willing to start cutting rates at the Federal Reserve's meeting on July 29-30.

However, since then, about ten Federal Reserve policymakers, including Fed Chair Powell, New York Fed President Williams, and San Francisco Fed President Daly, have poured cold water on this view.

Several Officials Indicate They Can Wait

Daly acknowledged in a media interview on Thursday that increasing evidence suggests tariffs may not lead to a large-scale or sustained rise in inflation. However, this only leaves her open to the idea of rate cuts in the fall. Daly stated, "My main expectation has always been that we will begin to adjust rates in the fall, and that view has not changed."

So far this year, the pace of price growth has been below expectations, with the Fed's preferred inflation measure rising 2.1% year-on-year in April, slightly above the 2% target.

Data released earlier on Thursday also showed that the number of people continuing to claim unemployment benefits rose to the highest level since November 2021, increasing significantly over the past six weeks, indicating that more people have been unable to find reemployment for an extended period. Meanwhile, initial claims for unemployment benefits fell in the week ending June 21.

Daly noted that while the labor market has slowed, she has not seen clear warning signs of significant weakness. She reiterated that the current monetary policy "is in a good position."

On Thursday, Boston Fed President Susan Collins said in a media interview, "Before the July meeting, we will only see one month of data, and I hope to see more information."

Collins indicated that her baseline expectation is to start cutting rates later this year. "This could mean one rate cut, or it could mean more than one, but I think we need to judge based on the data. I do not see an urgency for rate cuts."

On the same day, Richmond Fed President Barkin pointed out that he expects tariffs to exert upward pressure on prices. Given the significant uncertainty, the Fed should wait for clearer signals before adjusting rates. Barkin stated, "In the context of a currently strong economy, we have time to patiently observe and wait for a clearer outlook."

Also on Thursday, dovish Chicago Fed President Goolsbee stated that if inflation clearly falls towards the 2% target while economic uncertainty decreases, the Fed could resume rate cuts. "I am optimistic about the current data; perhaps the impact of tariffs will be limited to what it should be, but we need to confirm that."

Fed Chair Powell previously stated during a congressional hearing on Tuesday that, but for the future price uncertainty brought by tariffs, the Fed would have already begun cutting rates based on declining inflation. Before that, there was no need to rush to change the interest rate policy:

The impact of tariffs will depend on various factors, including their final levels. Currently, we have enough room to observe the economic direction before considering whether to adjust the policy stance.