In the early hours of June 3, 2025, Federal Reserve Chairman Powell made a public appearance at the 75th anniversary event of the Federal Reserve's International Finance Division (IF). Though the market is highly focused on the Fed's monetary policy direction, particularly the question of whether there will be future interest rate cuts, Powell avoided any substantive comments on the economic situation, inflation, or interest rates. This deliberate silence has driven the market to focus more keenly on remarks from other Fed officials.
Powell: Reflecting on History, Avoiding Forward Guidance
In his speech, Powell focused on the significant contributions of the Federal Reserve's International Finance Division in addressing the Latin American debt crisis, the 2008 financial crisis, and the COVID-19 pandemic. He particularly praised the department's key role in developing global capital flow models and crisis response mechanisms. Powell also expressed condolences for former Federal Reserve Vice Chairman Stanley Fischer's passing, calling him a "giant in the field of international economics."
However, despite the market's anticipation for policy guidance on the current economic situation, Powell did not touch on any topics related to inflation pressures, labor market trends, or paths for rate cuts. This silence is viewed by many analysts as Powell acting cautiously before the upcoming release of the May non-farm payroll data, aiming to avoid prematurely unsettling the market.
Goolsbee: If Tariffs Ease, Fed May Significantly Cut Rates
In contrast to Powell's low profile, other Federal Reserve officials made remarks with more direction. On June 2, Chicago Fed President Goolsbee stated publicly that if the tariff measures announced by the Trump administration are not as aggressive as feared, "policy rates are likely to drop significantly" within the next 15 months.
Goolsbee pointed out that the current fundamentals of the U.S. economy remain strong, with moderate inflation decline and stable labor market performance. He stated that the Fed's current "dual mandate"—maintaining price stability and promoting employment—is on a positive track, and if trade policy no longer poses great uncertainty, rate cuts would be a reasonable measure.
Notably, Goolsbee holds voting power on monetary policy in this year's FOMC and is recognized as an influential "dove" member.
Waller: Supporting "Good News" Rate Cuts if Inflation Is Controlled
On the same day, Federal Reserve Board member Waller delivered a speech at a central bank meeting in Seoul, South Korea. He mentioned that current inflation still poses upward risks, but if effective tariff rates remain low, core inflation continues to approach 2%, and the job market remains stable, he would support initiating "good news" rate cuts later this year.
Waller further pointed out that the recent widening of the U.S. fiscal deficit has prompted a rise in long-term Treasury yields, while geopolitical factors (including changes in tariff policies and signals from Washington) have heightened international market concerns about U.S. assets, potentially leading foreign institutional investors to reassess their U.S. asset allocations.
He especially cautioned that the levels of tariffs imposed on other countries remain uncertain, and changes in these policies will profoundly impact the future inflation trajectory over the coming months.
Market Expectations: Standing Pat in June, Rising Likelihood of Rate Cuts by Year-End
According to the schedule, the Federal Reserve will hold the next FOMC meeting on June 17-18. Swap market data indicates a 98% probability of "maintaining rates unchanged" in June. However, the market widely anticipates that the Federal Reserve might resume rate cuts after July.
The non-farm payroll report for May, due this Friday, is considered a critical indicator. Recent employment data has shown signs of cooling, and if this report continues to be weak, it will greatly increase policy pressure for rate cuts within the year.
