The divergence within the Federal Reserve is growing, with a 95.3% probability of maintaining interest rates unchanged in June.
As the tariff policy of the Trump administration complicates the inflation outlook, an intense policy debate is unfolding within the Federal Reserve. Doves advocate to 'ignore' the short-term impact of tariffs on inflation to pave the way for interest rate cuts, while hawks insist that the inflation risk may be more persistent than expected.
Dove camp: Tariff impact is just a 'temporary storm'
Reports indicate that Federal Reserve Governor Waller has clearly aligned himself with the dove camp. On Sunday night, Waller emphasized in a speech in Seoul that the inflation caused by tariffs will not be sustained.
Hawks strike back: Inflation risk should not be underestimated
Hawkish forces within the Federal Reserve are gathering to strike back. Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan have both clearly stated their support for maintaining interest rates unchanged.
Core controversy: The persistence of tariffs remains uncertain
Reports indicate that the future of Federal Reserve policy may hinge on the scale and persistence of tariffs. Minutes from the Federal Reserve's May meeting show that some officials believe that imposing tariffs on intermediate goods may lead to a more sustained increase in inflation. Trump's 'steel tariffs' have further intensified these concerns.
