Senior officials, including the second and third figures of the Federal Reserve, have spoken out, suggesting that interest rates may be maintained at least until September

On Monday, several senior officials from the Federal Reserve spoke out. Heavyweight officials, including the Vice Chairman of the Federal Reserve and the President of the New York Federal Reserve, the "third person" of the Federal Reserve, all indicated that the economic outlook is unclear, suggesting that the Federal Reserve may not be ready to cut interest rates before September this year.

The Federal Reserve maintained interest rates at its early May meeting, stating that the uncertainty brought about by tariffs has significantly increased. Policymakers also believe that there are upward risks to both unemployment and inflation in the future.

Currently, Federal Reserve officials are taking a cautious approach, closely monitoring data and inflation expectations. The next Federal Reserve meeting will be held on June 17-18, and investors currently believe that the likelihood of a rate cut at the next FOMC meeting in June is less than 10%, expecting only two rate cuts this year, each by 25 basis points, lower than the four rate cuts anticipated by the market at the end of April.

The Trump administration has implemented a wide range of new tariffs on several U.S. trading partners while also pushing for significant changes in immigration and regulatory policies. Economists generally expect that these policy changes will drive inflation upward and suppress economic growth, but there remains a high level of uncertainty regarding the final tariff levels and their economic impact.

Federal Reserve Vice Chairman: Current Policy Stance is Very Good

The second-in-command of the Federal Reserve, Vice Chairman Jefferson, stated that the Federal Reserve must ensure that price increases triggered by policy changes from the Trump administration do not lead to sustained inflation. Jefferson described the current policy stance as "very good," having a "moderately restrictive" effect on the economy. He advocates for a patient strategy in adjusting interest rates, aiming to maintain public stability in long-term inflation expectations, and suggests that the Federal Reserve should wait to see how policies evolve and their impact on the economy:

I believe it is very important for monetary policy to ensure that price level increases do not evolve into sustained inflation.

Given the level of uncertainty we currently face, I think it is necessary for us to wait and see how these policies evolve over time and their impacts.

We will maintain policy at a position that stabilizes inflation expectations while observing the final effects of all policy interactions.

When asked about Moody's downgrade of the U.S. credit rating last Friday, Jefferson stated that this would not change the Federal Reserve's policy stance. "We will treat this downgrade as we would any other information. It does not change our responsibilities."

On the same day, Jefferson also emphasized the Federal Reserve's role in liquidity. He stated that the Federal Reserve should be ready to provide liquidity to the financial system at all times, but also warned against taking actions that could encourage excessive risk-taking:

It is crucial for the central bank to clearly indicate its willingness to provide liquidity in times of stress.

But the central bank must also take measures to reduce moral hazard. In this context, moral hazard refers to concerns that public provision of liquidity may encourage private financial institutions to take on excessive risks.

Essentially, liquidity tools support the smooth operation and stability of the banking system, the effective implementation of monetary policy, and the development of a safe and efficient payment system.

President of the New York Federal Reserve: We won't understand what happened in June and July

The third-ranking official of the Federal Reserve, New York Fed President John Williams, stated that policymakers may need several months to gain a clearer understanding of the U.S. economic outlook. “We won’t know what happened in June, nor will we know in July. This is a process of collecting data, getting a clearer picture, and observing developments.”

Williams emphasized that uncertainty affects not only Federal Reserve policymakers but also businesses and households, as they struggle to predict how the Trump administration's tariffs and other policies will reshape the U.S. economy.

Like many of his colleagues, Williams indicated that the Federal Reserve can take its time to assess new data. He pointed out that while inflation has decreased and the economy is nearing full employment, he is still monitoring trends in default rates and consumer spending. He also mentioned that the current policy of the Federal Reserve is slightly restrictive and in a good state.

Atlanta Fed President: Suggests waiting 3-6 months

Atlanta Fed President Raphael Bostic also expressed a similar view, indicating that he does not plan to adjust interest rates for some time. He suggested waiting 3 to 6 months to observe the direction of the economy, noting the uncertainty in policy and the economy. “The economy is in a state of great volatility, and policy is also fluctuating, with significant uncertainty. I think we need to wait 3 to 6 months to get a clearer picture.”

Bostic is particularly concerned about inflation and public expectations for future price increases. “Given the trajectory of our dual mandate, I am particularly worried about inflation, mainly because we see expectations shifting in a concerning direction.”