Expectations for interest rate cuts rise in September! New York Federal Reserve President John Williams states that tariffs have not driven up inflation
The President of the Federal Reserve Bank of New York, John Williams, stated that the White House's increase in import tariffs has not significantly affected overall inflation, clearing the way for the Federal Reserve to cut interest rates in September. He pointed out that high interest rates have led to a cooling labor market and expects the U.S. economy to continue to slow down, with the unemployment rate rising to about 4.5% next year. Analysts generally expect the Federal Reserve to cut interest rates by 25 basis points at this month's meeting. Despite the market betting on a rate cut, internal opinions are increasingly divided
According to the Zhitong Finance APP, on Thursday, John Williams, President of the New York Federal Reserve, stated that there has not yet been a noticeable impact on the overall inflation trend from the White House's increase in import tariffs, which clears a potential obstacle for the Federal Reserve to cut interest rates at the September meeting.
Williams pointed out during a speech at the New York Economic Club, "We have not seen tariffs trigger an amplification effect or second-round impact on the overall inflation trend."
He is an important ally of Federal Reserve Chairman Jerome Powell, and this statement aligns with Powell's remarks at the Jackson Hole annual meeting, further reinforcing the policy signal for rate cuts.
Analysts noted that the lack of significant inflationary pressure means that the resistance to initiating rate cuts at the FOMC meeting on September 16-17 has eased. Derivatives market traders currently widely expect the Federal Reserve to cut rates by 25 basis points at this month's meeting.
For a long time, President Trump has repeatedly urged the Federal Reserve to cut rates as soon as possible, even mocking Powell for "acting too slowly." This year, the Federal Reserve has maintained a high interest rate policy aimed at applying downward pressure on inflation. However, maintaining high rates has also impacted interest-sensitive sectors such as housing and automobiles, while suppressing economic growth.
Williams emphasized that high interest rates have led to a significant cooling of the labor market. The latest data from the Labor Department shows that job growth has nearly stalled since May. He warned, "If the 'overly tight policy' lasts too long, it could unnecessarily undermine the stability and health of the job market."
He expects the U.S. economy to continue slowing in the coming months, with uncertainties in trade and immigration policies continuing to suppress economic growth, and the unemployment rate gradually rising to about 4.5% next year.
At the Jackson Hole meeting, Powell also expressed concerns about a sudden sharp rise in the unemployment rate, noting that historical cycles show that once the job market begins to deteriorate, it often worsens rapidly.
Regarding inflation, Williams expects the inflation rate to briefly rise above 3% in the short term, before gradually falling back to 2.5% by 2026, and returning to the Federal Reserve's long-term target level of 2% by 2027.
Although the market is betting on a rate cut by the Federal Reserve this month, internal opinions have clearly become more divided.
Bank of America expects significant disagreement in the September rate decision. Federal Reserve Governor Christopher Waller, Governor Michelle Bowman, San Francisco Fed President Mary Daly, and incoming Governor Philip Jefferson tend to support further rate cuts; while Cleveland Fed President Loretta Mester, Atlanta Fed President Raphael Bostic, and Governors Lisa Cook and Michelle Smith are more focused on inflation risks
