Senior Fed officials have spoken intensively: Not yet ready to support a rate cut at the July meeting

Author: He Hao, Source: Wall Street News

On Thursday, several Federal Reserve officials spoke and made it clear that they needed to observe for a few more months to confirm that the price increases caused by tariffs would not push up inflation in a sustained manner, and they were not ready to support a rate cut at the next meeting.

Recently, the speeches of Waller and Bowman, two Federal Reserve governors appointed by Trump during his first term as US President, have attracted attention. They both said that if inflation remains under control, they are willing to start cutting interest rates at the Federal Reserve's July 29-30 meeting.

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

Several officials said they could wait

In an interview with the media on Thursday, Daly admitted that there is increasing evidence that tariffs may not trigger a large or sustained rise in inflation. But this only makes her open to a rate cut in the fall. "My main expectation has always been that we'll start adjusting interest rates in the fall, and that view has not changed," Daly said.

Prices have grown at a slower pace than expected so far this year, with the Fed's preferred inflation measure rising 2.1% year-on-year in April, just above its 2% target.

Data released earlier Thursday also showed that continuing claims for unemployment benefits rose to the highest level since November 2021, rising significantly over the past six weeks, suggesting that more people have been unable to re-employ for a long time. At the same time, initial claims for unemployment benefits fell in the week ended June 21.

Daly said that while the labor market has slowed, she has not seen any warning signs of a clear weakening. She reiterated that monetary policy is "in a good place" for now.

"We'll only see one month of data before the July meeting, and I hope to see more," Boston Fed President Susan Collins said in a media interview on Thursday.

Collins said her base case is to start cutting interest rates later this year. "It could mean one rate cut, it could mean more than one, but I think we need to judge based on the data. I don't see the urgency of a rate cut."

On the same day, Richmond Fed President Barkin said he expected tariffs to put upward pressure on prices. With uncertainty still high, the Fed should wait for more clear signals before adjusting interest rates. Barkin said: "Against the backdrop of the current strong economy, we have time to be patient and wait for a clearer outlook."

Also on Thursday, dovish Chicago Fed President Goolsbee said that if inflation clearly falls back toward the 2% target and the uncertainty in the economic outlook decreases, the Fed can resume rate cuts. "I am optimistic about the current data, and perhaps the impact of tariffs will only be limited to what it should be, but we need to confirm."

Federal Reserve Chairman Powell said at a congressional hearing on Tuesday that if it were not for the uncertainty about future prices caused by tariffs, the Fed should have started to cut interest rates based on falling inflation. Before then, there is no need to rush to change interest rate policy: "The impact of tariffs will depend on many factors, including their final level. At present, we have enough room to observe the direction of the economy and then consider whether to adjust the policy stance."