Federal Reserve policymakers are divided over whether stubborn inflation or slower hiring poses the greater threat to the economy. As they prepare for an annual conference in Jackson, Wyoming, and a crucial policy meeting in September, officials are grappling with competing concerns.
Some, like Austan Goolsbee, president of the Federal Reserve’s Chicago branch, believe that weak job gains since April could be partly due to immigration restrictions imposed by President Donald Trump’s border crackdown, rather than a weaker economy. However, others, such as Michelle Bowman, a member of the Fed’s governing board, think that inflation concerns should take precedence.
The Fed is also divided on how tariffs will affect inflation going forward. While many believe they will result in only a temporary boost to prices, others, like Raphael Bostic, president of the Fed’s Atlanta branch, warn that longer-term effects could be significant if manufacturers shift production back to higher-wage countries.
Wall Street investors expect the central bank to reduce rates in September, with futures prices putting the odds of a cut at 93%. However, some economists, such as Tim Duy, argue that this may not be feasible given the current inflation outlook. The Fed’s policymakers currently expect inflation to reach 3.1% by the end of the year, which could make a rate cut challenging if it also implies higher future inflation.
The Fed’s decision will be closely watched for clues about next steps, particularly in Jerome Powell’s speech next Friday in Jackson. With another jobs report and inflation report before the September meeting, officials face an uncertain path forward as they weigh the competing concerns of inflation and job growth.
Source: https://apnews.com/article/inflation-trump-federal-reserve-10b69ac47322e412d667f3d44ccd62b7