Fed Chairman Jerome Powell Signals Possible Rate Cut as Early as July

The chairman of the Federal Reserve of America (Fed), Jerome Powell, stated on July 2 that cutting down the whales in July "is not out of the question," marking a clear shift towards a more dovish stance compared to the cautious view he has expressed in recent weeks. Speaking at the European Central Bank Forum (ECB Forum) in Sintra, Portugal, Mr. Powell said: "I really can't predict. The decision on interest rates will depend on economic data. We are looking at each meeting one by one." He further emphasized: "I do not rule out or confirm any meetings." Earlier, Mr. Powell had signaled that the Fed would wait until fall, around September, to consider cutting down the whales. However, under increasing pressure from President Donald Trump, he has shown signs of taking action sooner. Despite this statement, the financial market remains cautious. Investors seem to be more interested in the positive economic data released on the same day, including strong employment and manufacturing reports, rather than Mr. Powell's remarks. The yield on the 2-year Treasury bond has risen by 0.05 percentage points to 3.76%, indicating that investors are lowering their expectations for cutting down the whales this year. In the futures market, traders also scaled back bets on the likelihood of the Fed cutting interest rates as early as July, despite more dovish remarks from Chairman Powell. Meanwhile, Mr. Trump continues to publicly pressure the Fed. On Monday, he posted a handwritten note to Mr. Powell, which said: "Jerome, as usual, you are 'too slow'. You have cost America a fortune and continue to do so, you should lower interest rates, cut them down hard!" The question of when to cut interest rates is causing division within the Fed. Some officials with a moderate view want to lower rates soon to support economic growth. In contrast, the "hawkish" faction is concerned that the tariffs imposed by Mr. Trump could increase inflation. Mr. Powell also confirmed that the Fed has paused interest rate cuts as the Trump administration announced large tariffs in early April. "We paused when we saw the scale of the tariffs and when all inflation forecasts for America rose significantly for that reason," he said. At the forum, Christine Lagarde - President of the European Central Bank (ECB), along with the governors from the UK, South Korea, and Japan, all expressed support for Mr. Powell's cautious stance, asserting that they "will also do the same" in that context. When asked about his plans after his term as Fed Chair ends in May 2026, Mr. Powell declined to comment on whether he would like to stay in the role of Governor until 2028. However, he left a clear piece of advice for his successor: "The Fed needs to act completely independently of politics to fulfill its mission. We do not take sides, do not exploit one side to oppose the other, and do not interfere in issues that are not within our jurisdiction."