It's about interest rate cuts! The Federal Reserve Mutation! Officials send big signals

**Source**: Securities Times Network  

Fed Officials Suddenly Signal Major Policy Shift  

On May 19 (Eastern Time), Atlanta Fed President Bostic expressed concerns about future price increases in an interview, stating that inflation is moving in an "unsettling direction." As a result, he prefers only **one rate cut this year**, contradicting the Federal Reserve's earlier dot plot projection of **two 25-basis-point rate cuts in 2025**.  

On the same day, Fed Vice Chair Jefferson also emphasized the need for patience, noting that "waiting to observe how policies develop is appropriate given the current uncertainty." New York Fed President Williams, the third-ranking official at the Fed, warned that tariff policies could raise inflation and unemployment, adding that the economic outlook may not clarify until after June or July.  

According to the CME FedWatch Tool, the probability of the Fed keeping rates unchanged in June is **91.6%**, with only an **8.64%** chance of a 25-basis-point cut. For July, the probability of maintaining rates stands at **65.1%**, with a **32.5%** chance of a cumulative 25-basis-point cut and a **2.4%** chance of a 50-basis-point cut.  

### "Only One Rate Cut in 2025"  

In an interview on May 19 (Eastern Time), Atlanta Fed President Bostic stated that amid the Fed's current efforts to balance inflationary pressures and recession risks, he favors **only one rate cut this year**.  

Bostic explicitly noted that the impact of the Trump administration's tariff policies has exceeded the Fed's expectations.  

"For now, I think it will take longer to sort out the specific effects of these policies, so I currently prefer only one rate cut this year because I believe this process requires time," he said.  

According to the March 2025 dot plot, the Fed had projected **two 25-basis-point rate cuts for 2025**. Since December last year, the Fed has maintained the federal funds rate target range at **4.25%-4.50%**. At the May rate meeting, Fed Chair Powell emphasized that the central bank would not rush to cut rates.  

Bostic added that he wants to see reduced uncertainty from tariffs and other Trump-era policies before supporting any rate adjustments, a process he believes could take **3-6 months**. When asked which of the Fed's dual mandates (maximum employment and price stability) concerns him more, Bostic highlighted **upside price risks**.  

"I am very worried about inflation, mainly because we are seeing people’s inflation expectations moving in an unsettling direction... This will make our job more difficult," he said.  

A recent consumer confidence survey shows that Americans are increasingly concerned that tariffs could drive up inflation, reigniting inflationary anxieties. Bostic warned that even reduced tariffs could still have significant economic impacts. He also noted that Moody’s downgrade of the U.S. credit rating could negatively affect American households and businesses seeking loans.  

"This downgrade will impact capital costs and a range of other factors, potentially triggering a chain reaction across the economy," he said.  

### Fed Vice Chair Speaks Out  

On the evening of May 19 (Beijing Time), Fed Vice Chair Philip Jefferson stated during a Q&A session at the Atlanta Fed’s 2025 Financial Markets Conference:  

"I believe it is critical that monetary policy ensures any rise in price levels does not translate into sustained inflation."  

He added: "Given the current level of uncertainty, we should wait and see how policies evolve over time and their impacts. It is appropriate to bide our time and observe."  

Against the backdrop of a robust economy but uncertain Trump-era policies, Fed officials have uniformly advocated a patient approach to rate adjustments, reaffirming their commitment to anchoring long-term inflation expectations.  

Jefferson reiterated this stance on Monday, describing the Fed’s policy stance as "very good" and having a "moderately restrictive" impact on the economy.  

"We will maintain stable policy expectations and monitor the final effects of all policies," he said.  

When asked about Moody’s downgrade, Jefferson said the development would not alter the Fed’s policy trajectory.  

### New York Fed President Williams Weighs In  

On the same day, New York Fed President Williams (the Fed’s third-ranking official) addressed the state of U.S. dollar assets and the Fed’s rate policy at a Mortgage Bankers Association conference in New York.  

Williams emphasized the need for patience in assessing the U.S. economic outlook amid multiple policy changes under the Trump administration. He explained that understanding the impacts of policies—including tariff hikes—requires time, justifying the Fed’s patience before deciding on future rate moves.  

Williams warned that tariff policies could raise both inflation and unemployment, adding that the economic outlook may not clarify until after June or July. The Fed can afford to remain从容 (deliberate) in its monetary policy decisions, he said.  

Noting that while investors are adjusting strategies, there has been no mass exodus from U.S. assets—particularly the Treasury market—Williams observed that the Treasury market remains functional despite some price fluctuations. Even as yields rise due to changing market conditions, government bond yields have generally stayed within a stable range, he said.  

Commenting on the overall health of the U.S. economy, Williams stated it has performed well amid significant uncertainty. While recent data suggests potential challenges ahead, he emphasized that the Fed’s current moderately restrictive rate policy is well-suited to navigate future trends.  

Williams also noted that the Fed’s balance sheet reduction does not impact market prices and that the central bank has "a long way to go" in unwinding its assets.  

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