Inside the Fed’s Growing Divide Over Rate Cuts

​A fierce debate is emerging within the Federal Reserve: should it cut interest rates soon—or wait to see how President Trump’s tariffs affect the economy?

On one side, policymakers like Governor Christopher Waller argue that tariff-driven inflation will be short-lived. In a speech from Seoul, Waller said he supports “looking through” near-term inflation from tariffs, and believes cuts could come later this year if inflation keeps trending toward 2% and the job market holds steady. He envisions what he calls “good news” cuts—not crisis response, but policy normalization.

Chicago Fed President Austan Goolsbee echoed this sentiment, saying the economy is on a path to lower rates, despite what he called some “dirt in the air” from trade uncertainty.

But others are pushing back. Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan argue that inflation pressures from tariffs could linger and that the Fed should stay patient. Kashkari warned that tit-for-tat tariff escalations could stretch on for years. Logan emphasized the importance of defending inflation expectations and cautioned that premature rate cuts could trigger inflation spirals.

Fed minutes from May suggest that while some officials see inflation risks from intermediate goods and supply chain disruptions, others believe factors like weak demand or firms competing for market share could blunt the price impact.

Waller acknowledged that the second half of 2025 may reveal more inflation pressure, depending on how large the tariff increases are and how global businesses respond. Still, he believes labor market strength and lack of major supply shocks—unlike the pandemic—support a patient but open stance.

​Bottom line: The Fed is split. Doves want to act soon if inflation data cooperates. Hawks want to wait it out. The future of rate cuts hinges on how much of Trump’s trade turbulence shows up in the data—and whether it proves temporary or sticky.