Chicago Fed President Austan Goolsbee emphasized the need for caution before resuming rate cuts, citing uncertainty over the economic impact of the Trump administration’s policies.

Speaking in a TV interview overnight, Goolsbee stated that Fed remains in “wait-and-see” mode as it assesses the effects of new tariffs, immigration policies, tax cuts, government spending reductions, and federal workforce changes.

Goolsbee made it clear that if the administration’s policies push inflation higher, Fed is obligated by law to respond accordingly. However, he stressed that the overall policy package remains unclear, making it difficult for Fed to determine its next steps.

“There’s a lot of uncertainty, a lot of kind of dust in the air, and before the Fed can go back to cutting the rates, I feel and have expressed that we got to get a little dust out of the air,” he said.

Fed Governor Adriana Kugler said overnight that it’s “appropriate to hold the federal funds rate in place for some time”, citing the current balance of risks in the economy.

Kugler acknowledged that inflation still has “some way to go” before reaching 2% target. She highlighted that while the labor market remains strong and risks of a downturn have eased, “upside risks to inflation remain.”

Regarding the potential impact of new tariffs, Kugler stated that while they could contribute to higher prices, the extent of their effect remains uncertain. She emphasized that policymakers will need to “wait” for more data to assess how trade policy shifts might influence inflation and broader economic conditions.

St. Louis Fed President Alberto Musalem raised concerns overnight about inflation expectations becoming “unanchored”, emphasizing that the risk is higher when the economy is running without slack and after a period of elevated inflation.

Musalem pointed out that market and survey data show a notable rise in near-term inflation expectations over the past three months, reinforcing worries that inflation might remain above the Fed’s 2% target for longer than anticipated.

He warned that if inflation remains stuck at elevated levels or expectations continue to rise, “a more restrictive path of monetary policy relative to the baseline path might be appropriate.”

Atlanta Fed President Raphael Bostic noted his baseline expectation for two 25bps rate cuts later this year, but cautioned that “the uncertainty around that is pretty significant”, with multiple factors that could shift the outlook in either direction.

He acknowledged growing concerns from businesses regarding the potential impact of new tariffs, immigration policies, and regulatory changes on economic conditions.

He noted that there is both enthusiasm and “widespread apprehension” among business contacts regarding these policy shifts. Specifically, he warned that tariffs could push up costs, adding, “Many feel confident that if that happens, then they can pass along higher costs in their prices.”