Another Federal Reserve official speaks out: If tariffs do not lead to a rebound in inflation, the Federal Reserve can cut interest rates

In just a few days, after Waller and Bowman, a third Federal Reserve official has indicated that if tariffs do not trigger inflationary pressures, the Federal Reserve may resume interest rate cuts.

At an event on Monday, 2025 Federal Open Market Committee voting member and Chicago Fed President Austan Goolsbee stated:

The inflation data from the past three months shows that inflationary pressures are not significant, which is surprising.

If the increase in tariffs has not pushed up inflation, then the U.S. economy is still on the previous "golden path." If everything settles down, then I think we should move forward (with rate cuts).

Goolsbee further pointed out that some industries are experiencing a "burden-sharing" phenomenon, where the costs of tariffs are shared among suppliers, producers, and consumers. "What we are trying to figure out is: is this the full impact, or will more effects appear in the inflation data soon?" he said.

It is worth mentioning that this is the third Federal Reserve official to speak in favor of rate cuts after Waller and Bowman. Currently, there are differing expectations within the Federal Reserve regarding the outlook, with Deutsche Bank stating that the June dot plot reflects the highest level of disagreement among Federal Reserve officials in a decade.

Officials Have Different Views on Timing of Rate Cuts

The forecasts released by the Federal Reserve last week showed internal disagreements, with 10 officials supporting at least two rate cuts in 2025, while 7 officials believe rates should remain unchanged until the end of the year. Since then, several policymakers have expressed differing views on the timing of the next rate cut.

As mentioned in a previous article, Federal Reserve Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman—both appointed by Trump—indicated that if inflation remains controlled, they might support a rate cut in July. San Francisco Fed President Mary Daly, on the other hand, believes that the likelihood of a rate cut is greater sometime in the fall.

As mentioned in a previous article, Deutsche Bank stated that the June dot plot reflects the highest level of disagreement among Federal Reserve officials in a decade, as they have fundamental differences on how to balance inflation control with economic growth. However, measured by the difference between the maximum and minimum values in the dot plot, the uncertainty among Federal Reserve officials regarding the interest rate path in 2025 is not unprecedented and is even lower than the levels seen at the same time last year