On the eve of "Liberation Day," Federal Reserve officials continue to suppress expectations of interest rate cuts! Emphasizing that tariffs could exacerbate inflation in the United States.

Federal Reserve officials continue to pour cold water on the prospects of a rate cut, with Boston Fed President Susan Collins and Chicago Fed President Austan Goolsbee, both of whom have FOMC voting rights until 2025, emphasizing that higher inflation pressures in the United States may persist, supporting the Fed's decision to keep rates stable for an extended period. John Williams, the third most influential figure at the Fed and a permanent voter on the FOMC monetary policy during his term, stated that despite baseline forecasts showing inflation will remain relatively stable, there are significant upside risks to inflation this year due to the huge uncertainty caused by Trump's tariff measures, raising the threshold for a rate cut by the Fed. According to Williams, "Members of the Fed's FOMC generally believe that there are significant upside risks to the inflation outlook, which is in line with my personal judgment." He emphasized that the Trump administration's new round of tariff policies and other potential measures "undoubtedly pose significant risks." "Undoubtedly a lot depends on factors such as tariffs and other possible policies, so there are upside risks." Williams stated that the Fed is currently unsure of the long-term specific impact of Trump's tariff policies on the US economy, but the Fed will closely monitor the progress of future policies and economic data, particularly the pricing and activity changes in industries affected by tariff policies. He added that indirect effects may take several years to manifest. Williams refused to comment on potential timing of future rate cuts. Earlier in March, the Fed announced that it would maintain the benchmark interest rate unchanged, and officials have generally agreed in subsequent speeches or interviews that the current high interest rate level is appropriate, giving the Fed enough room to wait for clearer effects of Trump's tariff policy on the economy. "I believe that monetary policy is in a moderately tight state," Williams stated in an interview, noting that this cautious stance can be maintained for "some time" until the economic impact of Trump's tariff policy becomes apparent. According to the latest version of the "Official Summary of Economic Forecasts of the Federal Reserve" released earlier this month, Fed officials collectively downgraded their forecast for US economic growth this year, while raising long-term inflation forecasts, leading financial markets to expect the US economy to fall into "stagflation". "Stagflation" is an economic challenge that the Fed least wants to see, where the economy stagnates or goes into recession due to heavy pressure from US tariffs, and the central bank struggles to stimulate the economy with easing policies such as rate cuts, as inflation has lingered over the economy since 2022. In the Fed's economic forecast summary, officials significantly raised their expectations for US unemployment rates, and emphasized increased uncertainty in all forecasts. Williams reiterated that he expects US economic growth to slow down by 2025, partly due to a significant slowdown in immigration rate. In addition, in line with Fed Chair Powell's views, Williams believed that long-term inflation expectations in the US remain stable. Although the University of Michigan survey shows that US consumers' long-term inflation expectations for the next 5-10 years have risen to their highest level since 1993, he emphasized that other indicators have not shown such a remarkable increase. In contrast, Chicago Fed President Goolsbee, who has FOMC voting rights until 2025, recently pointed out that once long-term inflation expectations in the market also start to rise significantly, this will undoubtedly be a "major danger signal", signaling a long-term dovish policy stance. Goolsbee, who recently shifted his stance towards hawkishness, said that in the face of uncertainty, the Fed's next rate cut may take longer than expected. Wall Street giant Morgan Stanley recently issued a research report stating that the Fed may only cut rates once this year, possibly in June. This forecast by Morgan Stanley seems to be endorsed by Fed officials, with Atlanta Fed President Raphael Bostic stating last week that he expects only one rate cut this year, rather than the two rate cuts shown in the latest Fed dot plot, mainly because tariff increases have hindered the process of inflation falling. "I have adjusted my expectations to just one rate cut because I believe inflation will be very volatile and will not move clearly and significantly towards the 2% target. As inflation declines are postponed, I believe the corresponding policy path also needs to be postponed," Bostic said. It should not be assumed that the inflation pressure from tariffs is temporary. On the same day, Richmond Fed President Thomas Barkin, who has voting rights on the FOMC until 2027, stated that the Fed needs to be sure that inflation will continue to decline before announcing another rate cut, but Trump's tariff policy could continue to push up inflation, making the Fed's fight against inflation more difficult. He pointed out two possible paths for Fed rate cuts in an interview with CNBC: natural decline in inflation or severe economic deterioration forcing deflation. Barkin emphasized that evaluating the impact of Trump's tariff policy on the Fed's rate decisions "requires sufficient time," and it should not be assumed that the enormous inflation pressure from tariffs is temporary. He also highlighted the "Trump policy uncertainty" facing the US economy and its impact on the US business environment and consumer confidence. Since returning to the White House in January, the Trump-led US government has imposed new tariffs on several US trading partners and plans to announce on April 2 the so-called "reciprocal tariffs" and potential tariff details targeting specific industries. The Trump administration has called April 2 "Liberation Day." In the context of Trump's escalating trade war through increased tariffs, Federal Reserve officials have lowered their economic growth forecasts for 2025 and raised their inflation forecasts. After three consecutive rate cuts at the end of 2024, the Fed has maintained the benchmark interest rate unchanged this year. Faced with policy uncertainty and persistently sticky inflation above the 2% target since the beginning of this year, Fed decision-makers have collectively formed a "cautious wait-and-see" consensus, persisting in maintaining a cautious stance until the economic impact of Trump's tariff policy becomes apparent.High interest rate.The economic data released on Friday has made the market increasingly worried about the outlook for the US economy. The core PCE data, the inflation measure most favored by the Federal Reserve, shows that inflation is making a strong comeback. Consumer long-term inflation expectations in Michigan are at their highest level since February 1993, leading to a rise in market panic ahead of the April 2nd "US tariff retaliation day", with risk assets recently being heavily sold off. Amid escalating global trade tensions, risk asset bulls have faced multiple negative factors recently: a sharp drop in US consumer confidence, a clear rise in the Fed's preferred inflation measure (just ahead of the April 2nd "tariff retaliation day"), and long-term inflation expectations among US consumers at their highest level since February 1993. Under the dual pressure of persistently high inflation and the threat of the April 2nd "tariff retaliation", the S&P 500 and Nasdaq Composite indices saw their largest quarterly decline in nearly three years in the first quarter of this year, while safe-haven assets performed well. Spot gold rose 19% in the first quarter or about $500 to a high of $3127 per ounce, with COMEX gold futures up 19.6%. The inflation data released by the US Bureau of Economic Analysis on Friday showed that the Fed's preferred inflation measure, the core PCE index excluding food and energy prices, rose 0.4% month-on-month, the largest increase in a year, and the year-on-year increase reached 2.8%, both higher than previous values and economists' general expectations. It is understood that Susan Collins, president of the Federal Reserve Bank of Boston and a voting member of the FOMC with monetary policy authority until 2025, said last Thursday that tariffs are "inevitably" pushing up inflation. At least in the short term. Atlanta Fed President Bostic said he would prefer to keep rates unchanged in the long run, even if it means the Fed may have to take stronger action at some point. "In an environment of great uncertainty, it is better than risking going in the wrong direction and being forced to change course later." Bostic also emphasized that the uncertainty brought about by the frequent policy changes of the Trump administration has made economic forecasting more difficult. Chicago Fed President Gurley, who has voting rights on the FOMC monetary policy until 2025, recently stressed in an interview that borrowing costs may fall in the next 12-18 months, but he warned that due to the uncertainty facing the US economy, the next rate cut announcement may take longer than expected. In the recent speeches of senior Federal Reserve officials, a new word frequently appears: uncertainty. This phenomenon can be traced back to last week when Federal Reserve Chairman Jerome Powell mentioned the word "uncertainty" numerous times in his press conference on March 19. At that time, the Fed decided to keep rates unchanged, and Powell mentioned "uncertainty" 22 times in his speech. Facing the possibility that the Trump administration's tariff hikes may drive the "inflation beast" to sweep through the US once again, American consumers also express that they are facing more and more uncertainty. Due to the uncertainty of Trump's policies, the latest consumer confidence index released by the World Business Federation has fallen to its lowest level in over four years.