According to one analyst, the Fed’s interest rate cuts could be delayed until December, with the move likely to be greater than expected.
ING’s chief international economist James Knightley said the Fed won’t cut interest rates in a hurry, but could cut 50 basis points towards the end of the year.
According to Knightley, the inflationary effects of tariffs imposed by the Trump administration will bring together the Fed’s hands in the short term. But the economists said these effects are temporary and one-off, and the Fed will find room to lower interest rates in December to support growth.
The US money market is currently priced as a high probability of a September interest rate cut, but Knightley is cautious with prospects, suggesting that the Fed will wait a little longer before making bigger cuts.
A similar assessment came from Christopher Waller, a member of the Federal Reserve Board. Speaking in South Korea’s capital, Seoul, Waller acknowledged that President Donald Trump’s import tariffs could temporarily increase inflation, but said that such price pressure could be ignored in policy making. “I am in favor of ignoring the impact of tariffs on short-term inflation when deciding on monetary policy,” Waller said, adding that interest rate reductions could be possible this year.
*This is not investment advice.
