It doesn’t appear as though Federal Reserve officials are going to lower interest rates any time soon.
The Fed is expected to put off any rate cuts in the face of economic uncertainty surrounding President Donald Trump’s back-and-forth policies on tariffs.
A report from Bloomberg points out that a number of officials, in public comments and interviews, have signaled they are ruling out interest-rate cuts that would act as an insurance policy against any tariff-induced economic slowdown.
Instead, they are sticking to their commitment to keeping inflation and Americans’ expectations for price growth in check, a posture that will likely keep them on hold unless there’s a significant rise in unemployment.
“Given the paramount importance of keeping long-run inflation expectations anchored and the likely boost to near-term inflation from tariffs, the bar for cutting rates even in the face of a weakening economy and potentially increased unemployment is higher,” Minneapolis Fed President Neel Kashkari wrote in an essay released Wednesday. “The hurdle to change the federal funds rate one way or the other has increased due to tariffs.”
Chair Jerome Powell said Friday there’s no rush for the central bank to make any policy moves as they assess the impact of Trump’s fast-changing trade policies, Bloomberg reported.
With financial markets roiling since his April 2 unveiling of new import levies, Trump this week walked back plans to impose so-called reciprocal tariffs on a number of U.S. trading partners.
In an interview with Bloomberg News on Wednesday afternoon, Federal Reserve Bank of Cleveland President Beth Hammack said she, too, was committed to being patient.
“It’s a really active choice on our part that we really need to see where things are going to go,” Hammack said, according to Bloomberg. “I would much rather wait and move in the right direction than move quickly in the wrong direction.”
The latest iteration of Trump’s tariff plan, most countries will face a lower 10% baseline rate, giving room for them to negotiate a permanent deal. U.S. stocks rallied sharply on the news.
But Trump kept high tariffs on China – the White House confirmed Thursday tariffs on China had reached 145% –meaning the overall weight of tariffs on imports was little changed. Bloomberg Economics estimated that lifting the duties on China to 125% and reducing all others to 10% would lower the average U.S. tariff rate to 24%, from 27%.
“If we are understanding correctly, the latest announcement shifts tariff rates between countries a lot — but leaves the average US tariff rate only a little reduced, and still at a historic high,” said Rana Sajedi, Maeva Cousin and Tom Orlik of Bloomberg Economics, according to Bloomberg.
New data released Thursday showed consumer prices unexpectedly cooled last month, and the Fed’s favored measure of underlying inflation declined to 2.8% in the year through March, according to the Bureau of Labor Statistics.
