**Fed Officials Divided: Rate Cuts May Arrive Sooner Than Expected**

The U.S. Federal Reserve is showing signs of internal division, with differing opinions emerging on when interest rate cuts should begin. Fed Governor Michelle Bowman has publicly supported the idea of starting rate cuts as early as July—marking a clear deviation from Chair Jerome Powell’s more cautious stance.

Bowman emphasized that recent inflation data has been consistently easing. The core Personal Consumption Expenditures (PCE) index—the Fed’s preferred inflation gauge—even came in below market expectations. She noted this suggests that earlier inflationary pressures, especially those linked to goods and trade policy, are fading. At the same time, Bowman expressed concern over the short-term outlook for the labor market, highlighting the risk of a noticeable slowdown. In her view, delaying policy adjustments could heighten the risk of an economic downturn. As a result, she supports initiating discussions on rate cuts during the upcoming Federal Open Market Committee (FOMC) meeting scheduled for July 29–30.

In contrast, Powell remains measured in his approach. While acknowledging the recent cooling of inflation, he warned that temporary rebounds are still possible in the coming months. He reaffirmed the Fed’s wait-and-see attitude, saying the committee will not act until the data presents a clearer path forward. According to Powell, future policy decisions will hinge closely on upcoming economic indicators—particularly inflation trends and the strength of the labor market.

This divergence among Fed officials is fueling speculation in the markets that rate cuts might come sooner than previously anticipated. Although the probability of a cut in July remains low—rising slightly from 12.5% to 14.5% based on fed funds futures—the market is increasingly convinced that a September rate cut is likely, with odds now exceeding 60%. This shift reflects growing investor concern over slowing economic momentum in the U.S., and a belief that the Fed may be compelled to act faster.

Recent economic data backs up some of those concerns. Inflation, as measured by the Consumer Price Index (CPI), is rising at a slower pace, and job growth is starting to fall short of expectations. These developments have prompted many investors to reassess the underlying strength of the U.S. economy. Some Fed officials have also indicated that if incoming data continues to show weakness, cutting rates sooner could help stabilize market sentiment and restore confidence.

All eyes are now on the July FOMC meeting, which could offer valuable insight not only into the Fed’s near-term policy direction, but also into how officials are reading the broader economic landscape. Should rate cuts begin earlier than expected, it could have ripple effects across global markets—particularly influencing capital flows in emerging economies and impacting Hong Kong dollar interest rates.