The case for a Fed rate cut

The Fed delivered its first conflicted policy decision under Chair Jerome Powell last week, when St. Louis Fed president James Bullard opposed the decision to keep rates at their current 2.25%–2.50% level.

Driving the news: Minneapolis Fed president Neel Kashkari, who is not a voting member of the rate-setting committee, went further on Friday, calling for an unorthodox 50-basis-point cut to U.S. overnight interest rates immediately.

What they're saying:

• Bullard: "[B]oth the core and headline personal consumption expenditures (PCE) inflation measures have declined substantially since the end of last year and are presently running some 40 to 50 basis points below the FOMC's 2% inflation target. ... Market-based measures of inflation expectations have also weakened considerably and indicate an expected inflation rate substantially below the Committee's target."
• Kashkari: "The Committee has consistently been too optimistic in forecasting inflation returning to 2 percent. ...[W]e have said that 2 percent is a target, not a ceiling, so if we are under or over 2 percent, it should be of equal concern."

The other side: Bullard and Kashkari both talked about the negative impact tariffs and the U.S.-China trade war could have on the economy, but neither mentioned the impact of tariffs on inflation.

• What they're not saying: Tariffs are a tax on imported goods paid by U.S. businesses that new research from the New York Fed suggests would increase taxpayers' overall costs by $106 billion a year.
• There was also no mention of ultra-low interest rates' failure to stimulate inflation in Europe and Japan, where central banks have held rates below 0 for years and look poised to take them even further negative in the coming months. Inflation has not risen to 2% sustainably in either place.

Go deeper: Why Minneapolis Fed President Neel Kashkari advocated for a rate cut