「Fed Whisperer」: The Fed's internal 'unity' is no more, ushering in an era of division
BlockBeats News, July 10th, The Wall Street Journal reporter Nick Timiraos, known as the "Fed Whisperer," wrote that there is an internal debate within the Federal Reserve on how to address the risks posed by Trump's tariffs. This may mark the end of a relatively united period, with officials potentially divided on whether the new cost growth should be a reason to maintain high interest rates.
In recent weeks, Federal Reserve Chairman Powell has hinted that the threshold for rate cuts may be lower than it appeared in the spring, but no rate cut is expected this month. Instead, Powell has outlined a "middle path": if inflation data falls below expectations or the labor market shows slight weakness, this may be enough to prompt the Fed to start cutting rates before the end of the summer. This standard is lower than the previously stricter threshold—when faced with a significant tariff hike that triggered high inflation expectations on a larger scale, the Fed may have required more obvious signs of economic deterioration to consider a rate cut.
Trump's announced tariff hike in April exceeded expectations, raising concerns about economic growth slowdown and stagflation, disrupting the Fed's plans to resume rate cuts this year. However, since then, two developments have sparked a possible shift. First, Trump has reduced some of the most extreme tariff hikes; second, the consumer price increases associated with tariffs have not materialized. This has provided a key test for the theory of competitive inflation arising from tariffs and has led to internal disagreements on how to manage forecasting errors. (FXStreet)
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