2026 FOMC voting member Harker aligns with the "wait-and-see" camp: No consideration of interest rate cuts before inflation continues to cool

According to the Zhitong Finance APP, Beth Harmack, a voting member of the Federal Reserve FOMC and President of the Cleveland Federal Reserve, stated that before supporting the Federal Reserve in reopening the path to interest rate cuts, she would like to see inflation significantly decline further. In an interview with Fox Business News on Monday, Harmack said, "We have not yet met the requirements for achieving our inflation target. I think it is important that we continue to be cautious about the interest rate path and maintain a wait-and-see stance to see how all the new policies from the Trump administration will affect inflation and employment."

The market generally expects that the Federal Reserve will maintain interest rates at the meeting held in Washington on July 29-30. Although two Federal Reserve officials nominated by Trump—namely, Federal Reserve Governor Waller and Bowman—have hinted that they may support a rate cut at the July Federal Reserve monetary policy meeting, other Federal Reserve officials who have spoken publicly have indicated that more time is needed to assess the impact of tariffs on inflation.

In the latest public interview on Monday, Cleveland Federal Reserve President Harmack clearly stated that she would not support a rate cut unless she sees inflation decline further; most Federal Reserve officials also tend to remain on hold, waiting for the specific impact of new policies such as tariffs to be reflected in economic data, especially as some officials expect that inflation may trend upward this summer due to inventory depletion caused by tariffs. This suggests that, as the interest rate futures market generally expects, the Federal Reserve FOMC meeting on July 29-30 will likely maintain the current interest rate range, and the market needs to pay attention to subsequent trends in U.S. prices and employment to see if they provide "stronger evidence" for a rate cut within the year.

Harmack mentioned in the interview that she has heard some companies are pausing or scaling back investment plans until they further understand the potential impact of tariffs. However, she stated that recent data shows the U.S. economy remains resilient, and Federal Reserve officials can be patient. "I see the economy still has resilience," Harmack said. "I see the U.S. economy is performing very well, and unless we see substantial weakness in the labor market, I don't think there is a need to actually cut rates."

Harmack declined to disclose how many times she expects rates to be cut this year, but she added that she believes the benchmark interest rate set by the Federal Reserve is close to a neutral level—neither causing the economy to overheat nor slowing down U.S. economic growth.

After the unexpectedly strong non-farm payroll report released at the beginning of the month, and with Trump threatening further tariffs in a letter to various countries over the weekend, the inflation outlook faces significant uncertainty, leading global traders to significantly cool their expectations for Federal Reserve rate cuts, which has also caused Treasury futures traders to unwind some large bullish bets on the U.S. Treasury market.

The Federal Reserve has maintained the benchmark interest rate unchanged since December last year, and officials represented by Powell have expressed a cautious "wait-and-see stance" in interviews, rather than supporting a rate cut in July like Waller and Bowman. Powell told congressional lawmakers last month that if it were not for the uncertainty in future price outlooks caused by tariffs, the Federal Reserve should have already begun to cut rates based on the declining inflation situation. He also warned that there is currently no need to rush to adjust monetary policy. Additionally, Powell stated that he expects to see inflation readings rise this summer However, Powell also admitted in recent speeches that there is a high degree of uncertainty regarding the magnitude, timing, and persistence of rising inflation.

Trading data from the SOFR options market shows that options traders are generally betting that the Federal Reserve's first rate cut this year will be in September, and traders expect a total rate cut of 50 basis points this year, with each cut being 25 basis points—betting that the second rate cut will occur in December.

There are even signs of a heavy condor strategy emerging in the SOFR options market, which is a financial expression of the market's expectation for the Federal Reserve to remain "stuck in place" for the long term. In other words, some options buyers are positioning themselves against rate cuts, betting on a tough policy stance. This expectation is similar to the rate cut forecast from Wall Street giant Morgan Stanley, whose economists recently predicted that the Federal Reserve will not choose to cut rates in 2025, and they maintain the expectation that core PCE inflation will rise to 3.5% by the end of the year, forecasting that Trump's tough immigration policies will keep labor force growth steady, thereby keeping the labor market tight.

Trump has repeatedly criticized Powell's decision to keep interest rates unchanged this year, and last month he even stated in an interview that he would choose a successor to the Federal Reserve chair who is willing to cut rates. Powell's term as chair will expire in May 2026