Fed's Policy Puzzle: Diverging Paths Amid Economic Uncertainty

There is growing division among U.S. central bankers regarding future interest rate policies. While some foresee rate cuts, others disagree. Updated forecasts reveal changes in inflation, unemployment, and growth predictions, influenced by fluctuating trade policies under the Trump administration.

The Federal Reserve is encountering increasing internal disagreement about the direction of monetary policy. Recent forecasts indicate a consensus for a half-point rate cut by year-end, although a notable faction anticipates no cuts.

As data reveals, eight out of 19 Fed policymakers advocate for reducing the rate to 3.75%-4.00% by December, with two proposing an additional quarter-point cut. However, the number expressing no need for a rate change has grown to seven, highlighting heightened uncertainty.

The summary of economic projections for June portrays a scenario with elevated inflation and unemployment, compounded by unexpected trade policy dynamics under President Trump's administration. Policymakers anticipate inflation rates of 3.0% by year-end and foresee a mild dip next year, amid slower economic growth and a rising unemployment rate.

(With inputs from agencies.)