Federal Reserve Mouthpiece: The Federal Reserve is expected to hold steady, Waller's 'vote' or 'submission'?
The Federal Reserve is expected to pause interest rate cuts for the first time since last September this week to address the inflation deadlock. In the face of extreme pressure from the White House, Powell facing investigation, and tariffs driving up prices, there is significant internal disagreement within the Federal Reserve on when to restart rate cuts, and actions may be difficult before September.
For the market, the most challenging question now is not why the Federal Reserve has paused, but what conditions are needed to make them start again.
Higher Threshold for Rate Cuts
The Federal Reserve is expected to make only minor adjustments to its language and maintain the benchmark interest rate within the range of 3.5% to 3.75%.
Tariffs and Data
Bridging this disagreement in data may take months.
The key variable is whether retailers will pass on rising costs to consumers after depleting the inventory they stocked up before the tariffs took effect. If price increases are moderate, it will clear obstacles for rate cuts.
Difficult to Act Before September?
"In the past 18 months, inflation management has essentially been stagnant," said Matthew Luzzetti, chief U.S. economist at Deutsche Bank. He predicts that the Federal Reserve's next rate cut will not come until September.
Waller's Choice: Vote or Submit?
At least one dissenting vote is expected from Federal Reserve Governor Miran (Stephen Miran), and Governors Bowman (Michelle Bowman) and Waller (Christopher Waller) are also seen as potential supporters of rate cuts.
Among them, Waller's vote is particularly noteworthy. If Waller votes in favor of rate cuts, it will aid his 'campaign' in front of the President; if he chooses to go with the flow and pause, while it may demonstrate his independence, it could risk him losing the chairmanship.