Most Fed officials opposed a rate cut in July - Bloomberg

Several representatives of the U.S. Federal Reserve this week spoke out against cutting interest rates at the end of July, Bloomberg reported. Despite the hopes of some market participants and pressure from Donald Trump, the Fed wants to observe inflation for a few more months to make sure that the increase in import duties will not lead to a steady rise in inflation.

About a dozen Fed officials, including Chairman Jerome Powell, New York FRB President John Williams and San Francisco FRB Chief Mary Daly, have spoken out against a key rate cut in July over the past week, wrote Bloomberg. Their statements came after market attention last week was drawn to comments by Fed Governors Christopher Waller and Michelle Bowman that they could support a rate cut as early as the July 29-30 meeting if inflation remains subdued.

For example, Mary Daly stated to Bloomberg on June 26 that she sees increasing signs that import duties may not lead to a significant or sustained spike in inflation, but that just means she's willing to vote for a rate cut in the fall, Bloomberg reports.

«My baseline scenario has been assuming for some time that we could start adjusting the rate in the fall,» the head of the FRB San Francisco said. - And I continue to hold that view.»

More information is needed to make a decision, said FRB Boston President Susan Collins in an interview with Bloomberg News. «We'll only have one extra month of data before the meeting. That's not going to be enough for me. I expect to see more data,» she noted. Her base case scenario assumes the start of rate cuts later this year, «It could be one cut, it could be more, but the final decision will be dictated by the data. So far, I see no reason to rush,» - said the president of FRB Boston.

FRB Richmond Chief Tom Barkin in a speech to the New York Association for Business Economics reported that he expects inflationary pressures from duties. Given the ongoing uncertainty, he urged waiting on any action. «There's not much point in rushing in any direction,» echoed Collins Barkin. - Given the strength of the current economy, we have time to calmly observe the situation and wait for more certainty.»

FRB Chicago President Austin Goolsbee added that the Fed could return to cutting rates if inflation continues its steady move toward the 2% target and uncertainty about the economic outlook diminishes. «I'm optimistic: we're getting encouraging data, and maybe the impact of the duties will be limited to its area. But we want to make sure of that,» he said.

At a congressional hearing Tuesday, Fed Chairman Jerome Powell stated that with inflation continuing to fall, the regulator would probably have already started cutting rates - if not for uncertainty about future price dynamics due to duties.

«The impact of tariffs will depend, in part, on what they end up being,» Powell explained. - For now, we are in a good position to wait, get more information about the likely trajectory of the economy, and only then will we consider adjusting monetary policy.»

Powell said the Fed would like to see inflation data for June and July before making a rate decision to assess the effect of the duties on the economy. It is impossible to predict in advance how the duties will affect prices in the U.S., but the Fed «quite admits» that their impact on consumer prices may be weaker than the regulator had anticipated.

As noted by Bloomberg, Powell's speech did not suggest that he was completely ruling out the possibility of a rate cut in July. But the Fed chief also emphasized that the regulator doesn't need to rush and can well afford to «wait to learn more about the economy's likely course.»

Prices in the U.S. have been cooling off faster than expected this year: in April, the consumer spending index (PCE), which the Fed uses as a key inflation target, increased by 2.1% year-on-year - just slightly above the 2% target. While the index net of volatile food and energy prices was 2.5%.

Statistics released on June 27 also showed that the number of Americans continuing to receive unemployment benefits reached its highest level since November 2021. This continues the sharp rise of the past six weeks and signals that people are staying unemployed for longer and longer. Meanwhile, the number of new claims for benefits fell for the week ending June 21. According to Mary Daly, the labor market is indeed slowing, but she doesn't see signs of a significant weakening yet.

This article was AI-translated and verified by a human editor