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

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 persistently drive up inflation, and they are not yet prepared to support a rate cut 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 Jerome Powell, New York Fed President John Williams, and San Francisco Fed President Mary Daly, have poured cold water on this view. Several Officials Indicate They Can Wait Daly acknowledged in a media interview on Thursday that there is increasing evidence suggesting that tariffs may not lead to a large-scale or sustained rise in inflation. However, this only leaves her open to the idea of a rate cut in the fall. Daly stated, “My main expectation has always been that we will start adjusting 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, having increased significantly over the past six weeks, indicating that more people are struggling to find reemployment. Meanwhile, the number of initial unemployment claims for the week ending June 21 showed a decline. Daly noted that while the labor market has slowed, she has not seen clear warning signs of a significant weakening. 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 more than one, but I think we need to judge based on the data. I do not see an urgency for a rate cut.” On the same day, Richmond Fed President Thomas 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 Austan Goolsbee stated that if inflation clearly falls back toward 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 only be confined to where it should be, but we need to confirm that.” Fed Chair Powell previously stated during a congressional hearing on Tuesday that if it were not for the future price uncertainties brought about by tariffs, the Fed would have already begun cutting rates based on declining inflation. There is no need to rush to change the rate policy: The impact of tariffs will depend on various factors, including their final levels. Currently, we have enough space to observe the direction of the economy before considering whether to adjust our policy stance. **