"The Fed: Inflation is the main source of concern"
Several U.S. Federal Reserve officials affirmed their support for the decision to keep interest rates unchanged at the July meeting, emphasizing that the inflation trajectory will remain the decisive factor in monetary policy decisions in the coming period. Mary Daly, president of the Federal Reserve Bank of San Francisco, stated that she supported the decision to hold interest rates steady at the July meeting but warned that persistent inflation could be a broader problem requiring more stringent measures from policymakers. Daly outlined two potential inflation scenarios: the first involves inflation beginning to decline, allowing the Fed to maintain interest rates at current levels. Conversely, she warned of a second scenario in which price increases driven by tariffs, rising energy costs, and continued investment in artificial intelligence worsen, necessitating different monetary policy actions.
Meanwhile, Federal Reserve Governor Lisa Cook cautioned that the longer inflation remains above the Fed’s 2% target, the more difficult it becomes to control. She affirmed her readiness to support interest rate hikes if inflation does not slow down. Cook noted that the fading impact of tariffs, the possibility of lower oil prices, and the easing of some pressures associated with the boom in AI investment could help alleviate inflation and avoid the need for further monetary tightening. She also confirmed her support for the decision to keep interest rates unchanged at the Fed’s July meeting.
In his turn, New York Fed President John Williams predicted that inflation would decline during the second half of this year and continue to fall next year, asserting that current monetary policy is well-positioned to support this trajectory. Williams clarified that if the economy is not on a path to return inflation to its 2% target, it would be appropriate for the Federal Reserve to take necessary measures to ensure a return to that goal. Regarding geopolitical tensions, he indicated that, under the baseline scenario, he does not expect the conflict in the Middle East to continue pushing inflation higher in the second half of this year or next year, though he acknowledged that this assessment could change depending on developments.
The Federal Reserve kept interest rates unchanged for the second consecutive time at its July meeting in Washington, disregarding calls from President Donald Trump to cut rates. The Fed held the primary overnight interest rate steady in the range of 3.50% to 3.75%. The decision was made by a vote of 9 in favor and 3 against, with the Fed reaffirming its policy of maintaining adequate reserve levels within the banking system.
