Members of the Federal Reserve are sending mixed signals regarding the possibility of an interest rate cut in July.

The Fed’s Federal Open Market Committee (FOMC) has left the target range for the Federal Funds Rate unchanged at 4.25 to 4.5 percent since December. Following its June 18 meeting, the committee noted that, “recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.” All signs that an interest rate cut is not likely anytime soon.

Following that meeting, though, two members of the FOMC indicated that they plan to back a rate reduction at the panel’s July 29-30 meeting.

“If you’re starting to worry about the downside risk [to the] labor market, move now, don’t wait,” Federal Reserve Governor Christopher Waller said. “Why do we want to wait until we actually see a crash before we start cutting rates? So I’m all in favor of saying maybe we should start thinking about cutting the policy rate at the next meeting, because we don’t want to wait till the job market tanks before we start cutting the policy rate.”

Three days later, Federal Reserve Governor Michelle Bowman expressed a similar sentiment, though with some hedging, stating at a conference in Prague, “Should inflation pressures remain contained, I would support lowering the policy rate as soon as our next meeting in order to bring it closer to its neutral setting and to sustain a healthy labor market.”

The FOMC has 12 members, including Chair Jerome Powell, who was noncommittal about the timing of monetary policy in his June 24 testimony before Congress.

“I would say this: If it turns out that inflation pressures do remain contained, then we will get to a place where we cut rates sooner rather than later,” Powell told members of the House Financial Services Committee. “But I wouldn’t want to point to a particular meeting, I don’t think we need to be in any rush because the economy is still strong. The labor market is strong.”

Several members of the committee have expressed concern that the Trump administration’s tariffs could drive up inflation, with Powell noting, “We do expect tariff inflation to show up more, but I want to be honest, we really don’t know how much of that is going to be passed through to consumers.” If inflation rises, then an interest rate reduction would become much less likely, as the Fed would focus more on restraining price increases than stimulating the economy.

President Trump, however, has remained insistent that the central bank should do more about the latter, calling Powell a “very dumb, hardheaded person” in a June 24 social media post for his reluctance to cut rates.

“We will be paying for his incompetence for many years to come,” Trump wrote.

The Fed’s preferred measure of inflation, the Personal Consumption Expenditures (PCE) Price Index from the Bureau of Economic Analysis, showed year-over-year price increases of 2.1 percent in April, down from 2.3 percent in March. The Federal Reserve’s target inflation rate is 2 percent.

“If there wasn’t a trade war going on, we all might have been impressed by the resumption of inflation progress and the return of headline inflation to target,” an analyst at CIBC Capital Markets wrote, according to MarketWatch. “Today’s [PCE] data and the unpredictability of trade policy in Washington will reinforce the Fed’s desire to wait things out.”

Continued growth in the labor market could help to enable a patient approach. The economy exceeded expectations in May by adding 139,000 jobs, as the unemployment rate stayed at 4.2 percent.

“We’re seeing a softening in the labor market,” an EY economist told Yahoo Finance. “That’s undeniable. But it’s not a retrenchment in the labor market. And that’s what was feared.”

Consumers appear uncertain about the economic outlook, as The Conference Board’s Consumer Confidence Index dipped 5.5 percent from May to June.

“Consumers were more pessimistic about business conditions and job availability over the next six months, and optimism about future income prospects eroded slightly,” the board’s senior economist, global indicators, said, adding, “Tariffs remained on top of consumers’ minds and were frequently associated with concerns about their negative impacts on the economy and prices. Inflation and high prices were another important concern cited by consumers in June.”

The University of Michigan’s Index of Consumer Sentiment, though, rose in June for the first time this year, increasing nearly 16 percent from May.

“Consumers appear to have settled somewhat from the shock of the extremely high tariffs announced in April and the policy volatility seen in the weeks that followed,” the university’s Surveys of Consumers director said. “However, consumers still perceive wide-ranging downside risks to the economy. Their views of business conditions, personal finances, buying conditions for big ticket items, labor markets, and stock markets all remain well below six months ago in December 2024. Despite this month’s notable improvement, consumers remain guarded and concerned about the trajectory of the economy.”

Confidence remains middling in the manufacturing sector, with the Institute for Supply Management’s Purchasing Managers Index slipping in May to its lowest point since November and, for the third straight month, sitting below the level delineating expansion and contraction in the sector.

“Contraction in most of the indexes that measure demand and output have slowed, while inputs have started to weaken,” the chair of the institute’s Manufacturing Business Survey Committee said.