2025/6/25 Potential for July rate cut
Yesterday, remarks from global leaders followed one after another.
United States
Powell (Neutral)
・Most policymakers believe it would be appropriate to cut rates in the second half of this year.
・We expect significant tariff-related inflation in June, July, and August. If that does not materialize, it could lead to an earlier rate cut.
・Two or more rate cuts could bring the policy rate back toward a neutral level
Williams (Tskah) President (Hawkish)
・Companies are passing tariff costs to customers.
・We expect real GDP growth to slow to about 1% this year.
・There are signs that inflation is affecting some product categories.
・We expect the unemployment rate to rise to about 4.5% by year-end.
・Tariffs will push inflation up by about 3% this year.
・Tariffs may be contributing to inflation now, raising it by roughly a quarter of a percentage point.
・The impact of tariffs is likely to intensify over the coming months, and it will take time for tariff effects to fully show up in inflation data.
Hammack (Hawkish) President
・The Fed could keep monetary policy unchanged for a while.
・There is no near-term reason to cut rates
・I supported the Fed's decision to hold rates at the June FOMC meeting.
・I believe we need to monitor further before cutting rates.
・I am at the upper end of the Fed's dot plot.
Barr Deputy Chair (Dovish)
・Tariffs are expected to push up inflation.
・There is a risk that inflation could persist due to a temporary rise in short-term inflation expectations, supply chain adjustments, and secondary effects.
・Tariffs could slow the economy and raise unemployment.
Notes on the impact of tariffs on inflation, particularly in goods prices, may appear in June data.
Until the previous day, speakers including Waller and Bowman had been reluctant to cut rates, but Powell's prospect of two or more rate cuts seems to have entered market consciousness.
U.S. interest rates have fallen to around 4.3% with room to drop to around 4.25%.
Europe
Bilriod de Galloro, President of the Bank of France (Neutral)
・Despite market turmoil, the ECB may still cut rates.
・European Central Bank rates are back at neutral levels.
・Neutral rates are not terminal rates.
President Bilirod de Galloro notes that neutral rates are not terminal rates and are hypothetical, assuming neither inflation nor recession occurs; his remarks likely reflect the currently volatile markets.
United Kingdom
Bailey, Governor (Neutral)
・I think the labor market is starting to soften.
・The UK's potential growth rate is not as strong as GDP figures for Q1 would suggest.
Deputy Governor Ramsden (Neutral)
・There is accumulating evidence of a broad easing in the labor market that affects me.
・Currently, I place greater emphasis on downside risks to inflation in the medium term.
・The ratio of vacancies to unemployment has fallen sharply mainly due to a drop in vacancies.
・Latest wage data show private-sector employment is clearly contracting.
British officials are notably concerned about the softness of the labor market. The next employment report will continue to attract attention, and if softness persists, rate cuts may be accelerated.
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