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3mo ago

Fed Divided on July Rate Cuts as Trump Intensifies Pressure

Some Fed officials see a July rate cut as needed to preempt labor market weakness, contrasting with cautious voices pointing to lingering tariff uncertainties that could sustain inflationary pressures

U.S. President Donald Trump looks on as Jerome Powell, his nominee to lead the U.S. Federal Reserve moves to the podium at the White House in Washington, U.S., November 2, 2017. REUTERS/Carlos Barria/File Photo

Overview

  • The Fed left its benchmark federal funds rate unchanged between 4.25% and 4.5% at the June meeting, marking a fourth straight pause in tightening.
  • Governor Christopher Waller said cooling inflation and emerging signs of labor market softening justify considering rate cuts as early as July and that tariff effects appear transitory.
  • Richmond Fed President Thomas Barkin and other officials warned that unresolved tariff-driven uncertainties and inflation above the 2% target call for a more measured approach.
  • President Trump has publicly criticized Chair Jerome Powell and ratcheted up demands for immediate rate cuts to lower borrowing costs, even hinting at leadership changes.
  • Federal Reserve projections show slower GDP growth, higher unemployment and stickier inflation by year-end, complicating the timing and scale of potential rate adjustments.