The divergence among Federal Reserve officials regarding interest rate cuts has become public: some call for July, some expect this fall, while others are not in a hurry

The internal divisions among Federal Reserve officials regarding when to cut interest rates are becoming public.

On Friday, June 20, Eastern Time, the Federal Reserve's "rising star" Waller stated that he believes a rate cut could occur as early as the next FOMC monetary policy meeting in July.

Waller downplayed the impact of tariffs from the Trump administration on inflation, suggesting that the one-time effects of tariffs on prices should be ignored. He emphasized that if there are concerns about downside risks in the labor market, action should be taken now, asking, "Why wait until it actually collapses before we start cutting rates?"

Waller noted that economic data indicates that both GDP growth and inflation rates in the U.S. are close to the Federal Reserve's targets, and so far, the data has performed well. "I think we have room to cut rates, and then we can see how inflation develops." He believes the key is to restart rate cuts, and even if there are shocks similar to the Middle East crisis later, rate cuts can be paused again.

Barkin and Daly are not as eager as Waller

After Waller's remarks, two Federal Reserve officials with voting rights in the 2027 FOMC meetings expressed their views, and compared to Waller, who seems eager to cut rates, they are not as urgent.

Richmond Fed President Barkin stated that he believes the FOMC is not in a hurry to cut rates. He is not yet ready to rule out the inflation risks posed by tariffs. If U.S. inflation surges, it cannot be ignored, as the price index remains above target. Currently, there are no urgent factors in the data that require the Federal Reserve to cut rates.

Barkin commented that the U.S. job market and consumption remain strong. He mentioned that businesses expect to raise prices later this year as more expensive imported goods enter their inventories. Companies not affected by tariffs believe that the chaotic trade policies are causing price increases for other reasons.

Barkin stated that the ultimate outcome of the Trump administration's trade policies and how they will affect prices and employment is still uncertain. Businesses remain cautious about capital expenditures and hiring plans, and it seems that significant layoffs are not yet on the horizon.

Subsequently, San Francisco Fed President Daly anticipated that the FOMC might cut rates this fall. She said that personally, having more information might lead to a rate cut in the fall.

Daly emphasized that on the issue of rate cuts, action cannot wait until all fundamental conditions are met. She does not want the U.S. job market to transition from showing softness to showing weakness.

Daly remarked that so far, the U.S. economy and FOMC monetary policy are in good shape. The inflation data for May in the U.S. is indeed very good.

Economists evaluate Waller: The Federal Reserve is closer to cutting rates, just needs clearer economic evidence

Regarding Waller's remarks on Friday, TS Lombard Chief U.S. Economist Steven Blitz commented that Waller's words genuinely reflect that "the Federal Reserve is closer to cutting rates than they (themselves) admit; they just need some clearer confirmation from the economy indicating that action is needed."

Before the remarks from Waller and other officials on Friday, the latest dot plot of interest rate forecasts released after the Federal Reserve meeting on Wednesday showed that while most Fed decision-makers still expect two rate cuts of 25 basis points this year, the number of officials who do not expect a rate cut this year has increased compared to the last meeting In this dot plot, seven people expect no interest rate cuts this year, while in the last dot plot released in March, only four people had such a prediction.

According to the dot plot, the number of people expecting no interest rate cuts this time is only one less than the number expecting two rate cuts this year. Last time, a total of 16 people expected at least one rate cut this year, while this time, 12 people have such a prediction. Last time, 11 people expected at least two rate cuts this year, while this time, ten people have such a prediction.

Bloomberg data shows that the futures market currently indicates that investors expect two rate cuts this year, with the first occurring in October.