Part 5/7:
Krishna Guha of Evercore ISI notes that the potential pathway to the June cut hinges on the adoption of moderate tariffs. A retreat from current tariff levels against key trade partners such as Mexico and Canada could pave the way for a more favorable economic outcome. Accompanying this would need to be a context of subdued job growth, declining inflation, and managed inflation expectations.
Historical Context and the Fed's Strategy
Fed officials, including Mussallem, have acknowledged the lessons learned from past monetary policy mistakes—particularly during the 1970s when inflation dynamics were inadequately addresses. There is a clear intent to avoid a repeat of historical pitfalls, showing an awareness of the delicate balance that must be struck in current policy decisions.