The Federal Reserve (FED) officials speak out intensively: not yet ready to support a rate cut at the July meeting.

Multiple officials have clearly stated that it will take a few more months of observation to confirm that the price rise caused by tariffs will not push inflation higher in a sustained manner.

Written by: He Hao

Source: Wall Street Journal

On Thursday, several Federal Reserve officials spoke, and they clearly stated that more observation is needed for a few months to confirm that the price rise caused by tariffs will not persistently drive up inflation, and they are not prepared to support a rate cut at the next meeting.

Recently, the speeches of the two Federal Reserve governors, Waller and Bowman, appointed by Trump during his first term as President of the United States, have attracted attention. Both expressed their willingness to start lowering interest rates at the Federal Reserve meeting on July 29-30 if inflation remains under control.

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.

Multiple officials have stated that we can wait a bit longer.

Daly acknowledged in an interview with the media on Thursday that there is increasing evidence suggesting that tariffs may not trigger a large-scale or sustained rise in inflation. But this only leaves her open to the possibility of a rate cut in the fall. Daly stated, "My main expectation has always been that we will start adjusting interest rates in the fall, and that view has not changed."

Since the beginning of this year, the price growth rate has been lower than expected, and the inflation indicator preferred by the Federal Reserve rose by 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 apply for unemployment benefits rose to its highest level since November 2021, with a significant increase over the past six weeks, indicating that more people have been unable to find reemployment for a long time. Meanwhile, the number of first-time applicants for unemployment benefits decreased for the week ending June 21.

Daly stated that although the labor market has slowed down, she has not yet seen any obvious warning signs of weakness. She reiterated that the current monetary policy is "in a good place."

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

Collins stated that her basic expectation is to start cutting interest rates later this year. "This could mean one rate cut, or it could be 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 Barkin pointed out that he expects tariffs to create upward pressure on prices. Given the significant uncertainty, the Fed should wait for clearer signals before adjusting interest rates. Barkin said, "In the context of a strong current economy, we have the time to patiently observe and wait for a clearer outlook."

On Thursday, dovish Chicago Fed President Goolsbee stated that if inflation clearly falls back towards the 2% target and the uncertainty around the economic outlook decreases, the Fed can resume rate cuts. "I am optimistic about the current data; perhaps the impact of tariffs will be contained within what it should be, but we need to confirm."

Federal Reserve Chairman Jerome Powell stated on Tuesday at a congressional hearing that, but for the future price uncertainty brought about by tariffs, the Federal Reserve should have already begun to cut interest rates based on the decline in inflation. Prior to this, 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 space to observe the economic direction before considering whether to adjust our policy stance.