Analysts: The Fed's subsequent interest rate cuts are highly challenging at the communication level

Tom Graff, chief investment officer at Facet, says the Fed is clearly in a tricky position. Logically, they expect some inflation from the new tariffs, and ideally the Fed wants to wait until inflation has peaked before considering a rate cut. But the pressure is building, and even if there is no external pressure from the White House, the recent weakness in the labour market is enough to worry the Fed. In fact, this is probably the reason why Waller and Bowman voted against keeping interest rates unchanged and advocated a rate cut at the meeting. I think this decision sets the stage for the Fed to initiate a rate cut at the September meeting, and may cut interest rates one or two more times this year. The problem is that even though prices are likely to rise, the Fed still needs to start cutting interest rates, which will be extremely challenging to communicate. This is further exacerbated by Trump's continued pressure on interest rates. At that point, Powell may be seen as bowing to Trump's demands. But if job growth continues to weaken, the possibility of a recession will increase, and Powell will no longer be able to turn a blind eye.