Pouring cold water on the "September rate cut expectations"! The Federal Reserve's "hawkish voting members" speak out: Don't rush

The hawkish voice has arrived! The Federal Reserve's voting committee member recently warned: do not "hastily" cut interest rates before inflation is under control, pouring a bucket of cold water on the market's strong expectations for a rate cut in September. On August 13, according to media reports, Chicago Fed President and 2025 FOMC voting member Austan Goolsbee issued a hawkish warning, urging the Federal Reserve not to "hastily" cut interest rates before inflation is fully under control. Goolsbee stated that the Federal Reserve may face a "difficult period" in pushing inflation back to the 2% target. He emphasized that the central bank should not process information as quickly as the market does, implying a need for a more cautious policy path. Analysts say this statement shows a divergence within the Federal Reserve regarding the timing of rate cuts, contrasting sharply with the aggressive calls for rate cuts from Trump administration officials. According to the article mentioned, U.S. Treasury Secretary Janet Yellen earlier suggested that the Federal Reserve should lower the benchmark interest rate by 50 basis points at the mid-September meeting. Additionally, last Saturday, Fed Governor Michelle Bowman spoke in support of three rate cuts this year and urged the central bank to initiate rate cuts at the September meeting. Hawkish Voting Member Speaks: Do Not Rush According to reports, Goolsbee stated on Wednesday: "I understand that the market processes information quickly as part of its business model, but that does not align with my understanding of how central banks operate." The Chicago Fed President emphasized that the U.S. labor market remains stronger than the July labor market data suggests. He also pointed out that some details in the inflation data raised concerns, indicating that the Federal Reserve's efforts to curb price pressures may no longer be on the "golden path." The market had previously fully priced in expectations for a 25 basis point rate cut in September, driven by weak employment data released in early August and a relatively mild inflation report on Tuesday. According to a previous article, the overall CPI inflation rate in July rose 2.7% year-on-year, unchanged from June. However, the core inflation rate, which excludes volatile food and energy prices, rose from 2.9% to 3.1%, a measure considered to better reflect underlying price trends. Goolsbee stated: "We have had several months of quite mild and favorable inflation readings, and now we have a month with some concerning data." He warned that if service prices continue to rise significantly, "we will find it difficult to return to the 2% target." Government Officials Push for Rate Cuts In stark contrast to Goolsbee's cautious stance, Trump administration officials are actively pushing for rate cuts. U.S. Treasury Secretary Janet Yellen stated earlier on Wednesday that the central bank should consider lowering the benchmark target range of 4.25%-4.5% by 50 basis points at the mid-September meeting. Trump administration officials believe that the price index report released on Tuesday supports their claim that inflation is declining. Treasury economic advisor Joe Lavorgna stated: "After this report, if I were a policymaker or an investor, I would think that these data clearly support lowering interest rates." Additionally, Bowman, a board member who rarely cast a dissenting vote in the July FOMC meeting, now takes a more dovish stance. Bowman stated that she supports three rate cuts this year and urges the central bank to initiate rate cuts at the September meeting. Bowman indicated that the recent weak labor market data reinforces her view in favor of multiple rate cuts. She believes that a rate cut in September "will help avoid further unnecessary deterioration in labor market conditions," and she reiterated that price increases driven by tariffs are unlikely to push inflation up in a sustained manner. However, Goolsbee's cautious attitude suggests that there is not unanimous agreement within the Federal Reserve on lowering rates. He stated that while he "absolutely" does not want to tie his hands too early by committing to keep borrowing costs unchanged, he advises the central bank to remain vigilant