Analyst: Communicating Future Fed Rate Cuts Will Be Highly Challenging

According to ChainCatcher, Facet’s Chief Investment Officer Tom Graff stated that the Federal Reserve is clearly in a tricky position. Logically, they expect the new tariffs to bring a certain degree of inflation, and ideally, the Fed would prefer to wait until inflation peaks before considering rate cuts. However, the pressure is mounting—even without external pressure from the White House, the recent weakness in the labor market is enough to cause concern for the Fed.

In fact, this is likely the very reason why Waller and Bowman voted against holding rates steady and advocated for rate cuts at this meeting. I believe this decision has laid the groundwork for the Fed to begin cutting rates at the September meeting, with the possibility of one or two more cuts within the year. The challenge lies in the fact that, even as prices may rise, the Fed still needs to initiate rate cuts, which will be extremely challenging from a communication standpoint. Trump’s ongoing pressure on rates further complicates this communication challenge.

At that point, Powell may be perceived as yielding to Trump’s demands. But if job growth continues to weaken, the likelihood of the economy slipping into recession will keep rising, and Powell will no longer be able to ignore it.