According to one analyst, the Fed's rate cut could be delayed until December and the move could be larger than expected.
ING's Chief International Economist James Knightley said the Fed would not rush to cut interest rates but could make a strong 50 basis point cut towards the end of the year.
According to Knightley, the inflationary effects of the tariffs imposed by the Trump administration will tie the Fed's hands in the short term. However, the economist said that these effects will be temporary and one-time, and that the Fed will find room to lower interest rates in December to support growth.
While U.S. money markets are currently pricing in a higher probability of a September rate cut, Knightley was cautious about the prospect, suggesting the Fed may want to wait a bit longer before making a bigger cut.
A similar assessment came from FED Board Member Christopher Waller. Speaking in Seoul, the capital of South Korea, Waller acknowledged that President Donald Trump’s import tariffs could temporarily increase inflation, while stating that such price pressures could be ignored in policymaking. “I am in favor of ignoring the effects of tariffs on near-term inflation when determining monetary policy,” Waller said, adding that a rate cut is still possible this year.
*This is not investment advice.
