The rest clearly aren’t convinced.
“We’re only going to have really one more month of data before the July meeting,” Boston Federal Reserve Bank President Susan Collins told Bloomberg News in an interview on Thursday. “I expect to want to see more information than that.”
It’s not that Collins doesn’t expect to cut rates; in the same interview she signaled she could see one, possibly more, quarter-point interest-rate cuts this year. The decision will depend largely on how much and how fast Trump’s tariffs push up on inflation and unemployment, as she and many of her colleagues have said they expect to happen.
But with the unemployment rate at a healthy 4.2% and the job market cooling but still solid, Collins and most of her colleagues feel the Fed has time to keep policy on hold.
“Monetary policy is well positioned to allow us to wait and see how economic conditions unfold,” Fed Governor Michael Barr told a community development conference at the Cleveland Fed on Thursday, a phrasing that Fed Chair Jerome Powell and several other Fed policymakers have also used. San Francisco Fed President Mary Daly on Thursday told Bloomberg TV that her “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.” The Fed targets inflation at 2%, by the 12-month change in the personal consumption expenditures price index. By that measure inflation had cooled to 2.1% in April, and economists expect a government report tomorrow will show it reversed course and rose to 2.3% in May.
Economists and Fed policymakers alike expect it to rise further this year as businesses pass higher import costs onto buyers of their wares and services. Powell says he expects those increases to be meaningful.
Powell didn’t rule out that this forecast could be wrong; but he did suggest central bankers won’t know that until after the June and July inflation data are in hand.
Given the lags in government data, that information won’t be available until the tail end of summer, after the Fed’s July 29-30 meeting. The Fed would also have just one monthly jobs report before that meeting.
Projections from Fed policymakers released in tandem with last week’s Fed decision to leave short-term borrowing costs in the 4.25%-4.50% range showed that they for the most part think that conditions will call for two quarter-point rate cuts this year.
Bets in financial markets align with that view, though pricing has reflected a rising probability of a July rate cut after two Fed policymakers – Fed Governor Christopher Waller and Fed Vice Chair for Supervision Michelle Bowman – said in recent days that they feel a rate cut next month may be needed to head off potential weakness in the labor market.
Both also feel tariffs won’t deliver more than what Bowman called a “small, one-off” boost to inflation. For Bowman it was a particularly notable shift from her previously hawkish take on the risks of high inflation.
Chicago Fed President Austan Goolsbee, whose long-held view that rates will eventually need to be a fair bit lower than today marks him as among the more consistently dovish of the Fed’s policymakers, said on Thursday that he wants to be sure that if inflation does pop up that it doesn’t last.
“My hope would be that we don’t see the inflation,” Goolsbee said. “But we’ve got to get a few months of clarity before I’m ready to say that they (tariffs) didn’t have an impact.”
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