Federal Reserve Members Align: No Rate Cut in July as “Wait-and-See” Approach Gains Traction

TradingKey - On Thursday Eastern Time, several Federal Reserve officials delivered remarks clarifying their stance against supporting a rate cut at the next meeting, opting instead for a cautious approach to ensure that tariff policies do not continue to elevate inflation.

Previously, Fed Governors Michelle Bowman and Christopher Waller publicly voiced support for a rate cut in July. However, many Fed officials, including Chair Jerome Powell, tempered expectations for a July rate cut.

More Information Needed Before Easing: July May Be Premature

Thursday’s speeches by Fed officials revealed a consensus on rate cuts: they are not opposed, but the timing is crucial — initiating action in July might be premature. 

San Francisco Fed President Mary Daly noted evidence suggesting tariffs might not cause a significant or sustained increase in inflation. Still, she emphasized the Fed is awaiting more inflation data while maintaining its focus on reducing the inflation rate to its 2% target. Daly anticipates that the Fed may begin easing in the fall.

Other officials echoed this sentiment, suggesting that a July rate cut might not accurately account for the tariff impacts given the current data. Boston Fed President Susan Collins expressed a similar view, projecting a rate cut later in the year, allowing the Fed time to assess the data.

Powell expects data from June to August will reflect tariffs’ effects, but by the start of the July rate meeting, only June’s data will be available, influencing policy decisions. 

Meanwhile, Chicago Fed President Austan Goolsbee outlined conditions for a rate cut: inflation stabilizing at 2% and uncertainties being resolved.

Employment Data Supports Current Policy Stance

Some officials believe employment data also backs the existing monetary policy. Data released Thursday indicates that continuous unemployment claims have reached a two-and-a-half-year high, suggesting a slowing job market with more long-term unemployed. However, initial unemployment claims for the week ending June 21 decreased, indicating that employers are still retaining current staff. Daly observed that while the labor market is slowing, it has not yet shown significant weakening, and the current monetary policy is “well-positioned.”

Notably, Powell faced a “threat” from President Trump over his reluctance to cut rates — Trump mentioned narrowing down the list of potential Fed Chair successors to three or four candidates. However, White House information indicates Trump retracted this threat on Thursday, stating no imminent decision on the next Fed Chair would be made.

Following Trump’s further criticism of Powell on Wednesday, market anxiety over the Fed's independence led to the dollar index dropping below 97, the lowest level since early 2022. As of this writing, the dollar index has rebounded to 97.24, though it remains at a low level.