Barr favors moving cautiously on rate cuts, reinforcing Fed divide on inflation risks

Core Viewpoint - Federal Reserve governor Michael Barr advocates for a cautious approach to interest rates due to uncertainties surrounding the impact of tariffs on inflation, contrasting with some colleagues who favor aggressive rate cuts [1][2]. Group 1: Interest Rate Policy - Barr expressed skepticism about fully "looking through" higher inflation caused by import tariffs, indicating a divergence in views among Fed policymakers regarding interest rate adjustments [1][2]. - New York Fed president John Williams emphasized concerns about the job market and supports further interest cuts this year, citing a slowdown in payroll growth and hesitance among companies to hire [3][4]. - The Fed's recent meeting revealed divisions on whether to cut interest rates and by how much, although there was a consensus that further cuts could occur in 2025 [5][6]. Group 2: Inflation and Employment Concerns - Some Fed officials at the last meeting noted that while cutting rates was appropriate due to employment risks, there were significant concerns about inflation, highlighting ongoing internal divisions [6]. - Officials warned that if inflation does not return to the Fed's 2% target promptly, longer-term inflation expectations may rise, adding to the complexity of the Fed's decision-making [7].