A Divided Fed Eyes Future Rate Cuts But Won't Move This Week

Federal Reserve officials expect they will need to resume lowering interest rates eventually—they just aren't ready to do so Wednesday.

- Nick Timiraos

The questions dividing them center on what evidence they need to see first, and whether waiting for that clarity turns out to be a mistake.

The central bank had a united front when officials paused rate cuts earlier this year after President Trump's tariffs raised fears of renewed inflation. But with tariff-related price increases proving milder than many feared and signs that hiring may be softening, officials on the rate-setting committee are now fractured into roughly three camps over whether to resume easing.

The intricate internal debate coincides with unprecedented political pressure, with Trump demanding rate cuts and recently touring Fed building renovations that White House advisers have criticized as wasteful—part of a broader campaign to weaken Fed Chair Jerome Powell's standing.

The president may get what he wants, but not this week. The key focus will be whether Powell offers any hint of a September rate cut in his press conference Wednesday afternoon, and whether in the coming days and weeks his colleagues begin laying the groundwork for a cut at their next gathering.

San Francisco Fed President Mary Daly, whose views reflect the cautious center of officials on the committee, framed the dilemma facing policymakers: The inflation outlook has been too unsettled to justify cutting rates to pre-empt economic weakness, she said at a conference in Idaho this month.

But with rates still at a setting designed to slow the economy, "you can't wait forever" to lower rates without risking damage to the labor market, she said.