Fed Split Widens as Powell Holds, Waller Calls for Cuts, Dollar Slides Further

Fed Split Widens as Dollar Hits Multi-Year Lows

Federal Reserve officials remain sharply divided on rate cuts, adding uncertainty for traders as the dollar slides for a ninth consecutive session, reaching its lowest level in over three years. Chair Jerome Powell’s patient stance contrasts with calls for immediate easing, complicating USD positioning as markets weigh policy direction against weakening inflation data.

Powell Holds Caution as Tariff Risks Weigh on Inflation Outlook

Chair Powell reiterated a “wait and learn” stance, emphasizing the need to monitor summer inflation data for tariff impacts before adjusting rates. He highlighted concerns that tariffs could push prices higher in upcoming prints, arguing that “someone has to pay for the tariffs.” Powell described the labor market as strong and signaled no urgency for a July cut, even as markets aggressively price in easing, contributing to sustained dollar weakness as traders bet the Fed will pivot.

Bostic Supports Extended Restrictive Policy Despite Dollar Decline

Atlanta Fed President Bostic has emerged as the most hawkish, projecting only one cut for 2025, citing firm regional business expectations for price increases. He warned that cutting rates too early could fuel “pent-up exuberance,” reinforcing his view that policy should remain restrictive until inflation data clearly slows. However, the dollar’s decline reflects market skepticism about this stance, with traders interpreting broad Fed caution as insufficient to support USD strength.

Waller, Bowman Push for Immediate Rate Cuts to Protect Jobs

Fed Governors Waller and Bowman are urging cuts as early as July, arguing that delaying action risks labor market damage. Waller dismissed near-term tariff inflation, stating, “Move now, don’t wait,” while Bowman emphasized that tariff impacts may be smaller and delayed. Their dovish tone aligns with market expectations, which have driven the dollar lower despite the Fed’s official cautious positioning.

Traders Eye Inflation Data as Dollar Slides Further

The disagreement reflects deeper splits over inflation risks versus employment concerns, with upcoming CPI and PCE data critical for the Fed’s path and USD direction. The dollar’s persistent weakness suggests traders believe easing is closer than Powell signals, particularly if inflation data fails to confirm tariff-driven pressures.

Market Forecast: Dollar Remains Soft, Tactical Bounce Possible on Data Surprise

With the dollar near multi-year lows, further downside remains likely unless inflation prints surprise to the upside, forcing the Fed to maintain higher rates longer. A tactical bounce toward the 97.40–97.60 zone is possible if data beats expectations, but the broader USD trend remains bearish until the Fed’s internal split resolves with clear evidence against early cuts. This puts 95.137 on the radar.

More Information in our Economic Calendar.