The Fed is taking a "wait-and-see" approach to the impact of tariff policies, and the interest rate cut decision remains uncertain

Macro Global Markets：The Federal Reserve maintains a "wait-and-see" stance, and the impact of Trump's policies becomes a key variable in the decision to cut interest rates. Chicago Fed President Austan Goolsbee clearly pointed out that the Federal Reserve is currently in a "wait-and-see" state and will not take rash action until the comprehensive impact of a series of new policies of the Trump administration on the economy becomes clear. These policies cover multiple dimensions, including trade tariff adjustments, immigration policy changes, tax structure optimization, government spending cuts, and federal employee layoffs. He emphasized that before making a decision to cut interest rates, the Federal Reserve must wait for the policy effects to be fully released until the situation is "settled."

 

On Monday, Austan Goolsbee said in an interview with Chicago Public Television (WTTW) that the Federal Reserve is currently paying close attention to the new policy direction of the Trump administration, and will finalize the follow-up action plan only after obtaining more detailed and accurate economic data and having a clearer understanding of the overall economic situation.

Austan Goolsbee pointed out: "The current economic environment is full of uncertainties and the market is in a highly volatile state. Before the Fed further promotes its interest rate cut measures, it must wait for these uncertainties to be gradually eliminated."

He further elaborated that the recent policy adjustments of the US government in areas such as tariffs, immigration, taxation, fiscal spending cuts and federal employee layoffs are very likely to have complex impacts on economic growth, the balance of supply and demand in the job market and the level of inflation. Therefore, the Federal Reserve adheres to the principle of prudence and will not make decisions easily.

The market is betting on a rate cut in July, but there are differences of opinion within the Fed

Although the market generally expects that the Federal Reserve may start a rate cut cycle in July, Austan Goolsbee's statement shows that the Federal Reserve has not yet reached a consensus on the timing and necessity of rate cuts.

From a market perspective, if Trump's policies lead to a weakening of economic growth momentum and economic data continues to weaken, the Federal Reserve may be forced to accelerate the pace of interest rate cuts to stimulate economic recovery; however, if inflationary pressures continue to be high and exceed the Federal Reserve's target range, the Federal Reserve may delay the implementation of loose monetary policy to stabilize price levels.

Gold prices diverge as risk aversion dominates the market

Against the macro backdrop of the Federal Reserve maintaining a cautious attitude and increasing policy uncertainty of the Trump administration, the gold market showed a differentiated trend.

As market concerns about global economic uncertainty intensify and expectations for the Federal Reserve to cut interest rates continue to grow, gold, as a high-quality safe-haven asset, has been enthusiastically sought after by investors and its price has approached historical highs. In addition, if the Federal Reserve eventually implements a rate cut, real interest rates will decline and the opportunity cost of holding gold will decrease, which will further enhance the attractiveness of gold in the investment portfolio.

Conclusion

Austan Goolsbee's remarks indicate that the Federal Reserve remains highly cautious about the current complex and changing economic environment and will not blindly take interest rate cuts due to market expectations. Trump's policy mix is ​​like a double-edged sword, which not only carries the risk of pushing up inflation, but may also suppress economic growth. This undoubtedly adds many difficulties to the Federal Reserve's monetary policy decisions.

In the short term, the Federal Reserve will closely monitor changes in key economic data such as inflation rate, unemployment rate, and consumer spending in the coming months, using this as an important basis for judging the economic situation and then deciding whether to initiate a rate cut in July to achieve the policy goals of economic growth, price stability, and full employment.

 

As of 15:00 Beijing time, the spot gold price was 2935.63/ounce.