The Wall Street Journal (gated) Fed watcher Nick Timiraos highlights division within the Federal Reserve on the path for inflation and rate cuts.
- Trump's tariff hikes are fueling internal debate at the Federal Reserve over whether to delay or advance interest rate cuts, as policymakers weigh the inflationary impact against slowing growth.
- Fed Chair Jerome Powell has signaled a more flexible stance, suggesting the bar for cutting rates may be lower than it was earlier this year, especially if inflation softens or labor market data weakens.
- A rate cut isn't expected at the upcoming meeting, but Powell has outlined conditions under which cuts could come by the end of summer—without waiting for dramatic economic deterioration.
- April's surprise tariff increases disrupted earlier Fed plans to resume rate cuts, raising fears of a stagflation scenario with rising prices and slowing growth.
- In such an environment, Fed officials would likely need clearer signs of economic cooling to be confident that any inflation spike would be temporary.
This article was written by Eamonn Sheridan at www.forexlive.com
