Two Senior FED Officials Discussed Tariffs and the Possibility of Interest Rate Cuts!

FED officials emphasized that cautious steps should be taken in interest rate policy in the current economic outlook. Chicago Fed President Austan Goolsbee and Boston Fed President Susan Collins made significant evaluations regarding interest rates, inflation, and trade tariffs.

Chicago FED Chairman Austan Goolsbee stated that it is necessary to monitor the course of the economy before taking a new step in interest rate policies. Goolsbee, who said, "The threshold for the FED's policy changes is currently quite high," emphasized that all policy options should be kept on the table.

Goolsbee stated that the current tariffs would increase inflation in the short term and negatively affect economic growth. Describing the tariff system as a "significant scenario," Goolsbee noted that despite the Trump administration suspending some measures, the current levels are above most scenarios.

Despite the previous wave of sales in the bond market, Goolsbee stated that the strong performance of the 10-year Treasury bond auction has eased market concerns, adding that these sales are not limited to the US. Highlighting the difficulty of measuring financial conditions, Goolsbee refrained from speculation on how the FED would respond to market stress.

Noting that employment data continues to remain strong, Goolsbee expressed a preference for relying on the market's inflation expectations rather than survey data.

Boston FED President Susan Collins stated that the current interest rate policy is in a good position and that maintaining it seems to be the best option. Collins expressed that there is still room for an interest rate cut within 2025, but the re-emerging price pressures could delay this cut.

Collins stated that the tariffs would create upward pressure on inflation and slow down economic growth, warning that this situation could push core inflation well above 3% this year. Collins also emphasized that it is crucial to keep inflation expectations stable.