Amid uncertainty regarding the United States' tariff policy and the impact of the downgrade of the national credit rating, senior officials at the Federal Reserve (Fed) are expressing caution about the timing of interest rate cuts. Despite ongoing pressure from President Donald Trump for rate reductions, the Fed is signaling to the market that it is highly likely to maintain the current rate at least until September.
On the 19th (local time), according to reports from Bloomberg and Reuters, John Williams, president of the New York Federal Reserve Bank, emphasized during the Mortgage Bankers Association (MBA) conference that it is difficult to determine what will happen to the U.S. economy in June or July and that there is a need to monitor the data further.
He noted that in a situation of high volatility and uncertainty surrounding the Trump administration's policy changes, there is a greater need for understanding the economy, stating that while there are some concerns about dollar-denominated assets, there are no significant changes in the inflow of foreign funds into U.S. Government Bonds. Despite the recent rise in U.S. Government Bonds yields, he assessed that "the U.S. Government Bonds market is functioning very well," praising the stability of the core bond market.
He further diagnosed that the overall situation of the U.S. economy is "very favorable" and stated that the current tightening monetary policy of the Fed is "very appropriately set" in an environment of high uncertainty.
The Fed has kept the benchmark interest rate frozen since lowering it to 4.25% to 4.50% in December of last year. Future meetings of the Federal Open Market Committee (FOMC) are scheduled for June, July, September, October, and December.
According to the Chicago Mercantile Exchange (CME) FedWatch, the interest rate futures market is forecasting a 91.4% chance of an interest rate freeze in June, 66.9% in July, and a low 29.7% in September for a rate cut. The annual forecast for the number of interest rate cuts is also shifting from the previous four to two.
Raphael Bostic, president of the Atlanta Federal Reserve Bank, also reaffirmed the position of keeping rates steady in an interview with CNBC and Bloomberg TV. He stated that considering both inflation and the potential for economic slowdown, "one cut this year would be advisable," and he highlighted the need to monitor for another three to six months considering the impact of trade negotiation speeds and the downgrade of the credit rating.
Moody's downgraded the United States' national credit rating from "Aaa" to "Aa1" on the 16th.
Neel Kashkari, president of the Minneapolis Federal Reserve, also expressed a willingness to defer policy decisions until more information is secured.
Philip Jefferson, vice chair of the Federal Reserve, stated at an event that in the current situation of high uncertainty, it is appropriate to monitor the impacts of policy changes, noting that the downgrade of the credit rating will also be evaluated concerning the Federal Reserve's core goals of price stability and achieving employment. He added that political factors are not part of the assessment.
Meanwhile, President Trump continues to exert pressure despite the Fed's cautious stance. On the 13th, he claimed through Truth Social that "the Fed should lower rates like Europe and China."