A flurry of Federal Reserve officials this week made clear they’ll need a few more months to gain confidence that tariff-driven price hikes won’t raise inflation in a persistent way.
Fed Governors Christopher Waller and Michelle Bowman captured attention in the past week when they signaled they’d be open to lowering rates as soon as the Fed’s July 29-30 meeting if inflation remains contained.
Since then, however, nearly a dozen policymakers — including Chair Jerome Powell, New York Fed President John Williams and San Francisco Fed chief Mary Daly — have dumped cold water on that idea.
In an interview Thursday on Bloomberg Surveillance, Daly acknowledged she’s seeing increasing evidence that tariffs may not lead to a large or sustained inflation surge. But that merely made her open to a rate cut “in the fall.”
“My modal outlook has been for some time that we would begin to be able to adjust the rates in the fall, and I haven’t really changed that view,” Daly said.
Prices have cooled more than forecast this year, with the Fed’s preferred gauge rising 2.1% in April, just above the central bank’s 2% target.
Data released earlier Thursday also showed continuing claims for unemployment benefits jumped to their highest level since November 2021, extending a sharp increase over the past six weeks and signaling more people are staying out of work for longer. At the same time, initial jobless claims fell in the week ended June 21.
Daly said that while the labor market is slowing, she’s not seeing warnings signs that its weakening.
She repeated her view that monetary policy is currently in a “good place.”
Speaking separately Thursday, two other Fed officials signaled they aren’t ready to support a cut at the Fed’s next meeting.
Richmond Fed President Tom Barkin, in remarks to the New York Association for Business Economics, said he expects tariffs will put upward pressure on prices. With so much remaining uncertain, he added, the central bank should wait for more clarity before adjusting rates.
“There is little upside in heading too quickly in any one direction,” Barkin said. “Given the strength in today’s economy, we have time to track developments patiently and allow the visibility to improve.”
Chicago Fed President Austan Goolsbee said the central bank could resume rate cuts if inflation is clearly trending toward policymakers’ 2% goal and uncertainty over the economic outlook recedes.
“I’m optimistic that we’ve been getting good readings and maybe the impact of tariffs will be held just in their lane, but we want to be sure,” he said.
In testimony before a congressional panel on Tuesday, Powell said the Fed would probably be cutting rates by now, based on declining inflation, if not for the uncertain outlook for future prices because of tariffs. In the meantime, there was no need to rush into any rate changes.
“The effects of tariffs will depend, among other things, on their ultimate level,” Powell said. “For the time being, we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.”
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