Federal Reserve officials split in July on interest rate cuts and tariffs, Powell: Rates should be adjusted after the situation becomes clearer.

Federal Reserve Bank of Richmond President Tom Barkin said that he expects tariffs to put upward pressure on prices and, given the many uncertainties that still exist, the Fed should wait for more clear signals before adjusting interest rates. Barkin pointed out that the uncertainty brought by tariffs is still "significant," causing business leaders to pause hiring and new investment plans. He also noted that the budget outlook is unclear and developments in the Middle East add to the uncertainty of the outlook. In a speech prepared for an event hosted by the New York Association for Business Economics on Thursday, Barkin said, "There's little benefit in quickly moving in any direction," and "Given the current economic strength, we have time to patiently monitor developments and make the outlook clearer." Fed officials generally indicate a preference to wait and observe the impact of tariffs and other policies on inflation and the overall economy before adjusting interest rates. However, there is a clear divide within the committee, with Fed governors Christopher Waller and Michelle Bowman suggesting they may support an interest rate cut as early as July. Barkin mentioned that business contacts are planning to pass on higher costs to consumers, although the impact on inflation so far has been "moderate." But Barkin said, given the magnitude of tariff increases, "we do expect to see price pressures." He provided insight into when the impact of tariffs may start to show by quoting a large retailer saying, "To understand what the large increases in tariffs in April and May mean, he recommends watching prices in July and August." However, he made it clear that he does not believe the impact of tariffs on inflation will come close to the price spikes seen in recent years, as consumers may resist price increases. He added that this resistance could lead to job cuts. "If sales decline after businesses raise prices, costs need to be lowered; if profits are lost because prices cannot be raised, costs still need to be reduced," he said, "In either case, cost-cutting may mean layoffs, suggesting that the current environment of low hiring and low firing could be threatened."