Fed Policymakers Divided on Timing of Rate Cuts Amid Economic Uncertainty
Most Federal Reserve officials still expect to lower interest rates later this year, but the latest meeting minutes reveal growing disagreement over the timing and pace of any potential easing. According to minutes from the Fed’s June 17–18 meeting released Wednesday, some members are pushing for rate cuts as early as July, while others believe no action is needed this year due to ongoing inflation concerns.
“Most participants judged that a reduction in the federal funds rate range would likely be appropriate before year-end,” the minutes stated. However, there was a notable split: a few policymakers favored a July cut, while others preferred holding steady, citing persistent inflation risks.
These differing views aren’t unexpected. Fed Governor Christopher Waller recently downplayed inflation risks tied to tariffs and suggested that rate cuts could begin as soon as next month. Similarly, Vice Chair Michelle Bowman expressed support for a potential July reduction if inflation stays contained.
On the other hand, Fed Chair Jerome Powell has maintained a cautious stance, advocating for patience amid policy uncertainty, particularly in light of new tariffs. Powell has also resisted political pressure from President Trump, who has publicly criticized him for not cutting rates. According to Powell, tariffs have played a significant role in stalling rate cuts by driving up inflation expectations.
“We effectively paused when we saw the scale of the tariffs,” Powell said during a July 1 speech at the European Central Bank forum in Portugal. “Almost all inflation forecasts for the U.S. rose substantially due to these tariffs.”
At the June meeting, the Federal Open Market Committee (FOMC) opted to keep its key interest rate unchanged at 4.25%–4.5%. While officials still anticipate rate reductions, they now foresee fewer cuts next year. The committee raised its forecast for 2026 rates to 3.6% (up from 3.4%) and for 2027 to 3.4% (from 3.1%).
Stronger-than-expected economic data, including the June jobs report, has supported Powell’s more measured approach.
“A slower payroll trend isn’t loosening the labor market,” Morgan Stanley noted in a recent report. “With employment still balanced and adapting gradually to policy changes, the Fed isn’t under pressure to act quickly. We continue to expect the Fed to stay on hold while monitoring inflation and consumer spending for signs of tariff impact.”
