Fed Officials Split Sharply on Tariff Impact and Urgency of Rate Cuts

The new economic forecast released by the Federal Reserve this week anticipates slower economic growth and rising inflation. However, policymakers still expect to cut interest rates later this year—indicating that while they do believe tariffs will drive prices higher, the effect is not expected to be lasting. There is significant divergence in opinions: among 19 officials, seven believe no rate cuts are needed this year, while eight expect two cuts, which aligns with investors’ expectations for 25 basis point cuts at the Fed’s September and December meetings. Another two officials anticipate one rate cut, and two expect three cuts. After the decision, Fed Governor Waller and Fed’s Barkin shared their views on interest rates, with the former suggesting a possible rate cut as early as July, and the latter indicating no rush to cut rates. Although neither Waller nor Barkin specified their exact stance on rates, their comments represent two extremes regarding how much Trump’s tariffs will impact prices, employment, and economic growth in the coming months. (Jin10)