Federal Reserve governor Adriana Kugler said the Fed should hold interest rates steady for a while to come, because new trade barriers are likely to spark more inflation in the months ahead. Speaking at a housing conference in Washington,

"I certainly think there are lessons to be learned there that the administration should be aware of," said Morningstar Wealth's Dominic Pappalardo.

“With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate,” he said. “I believe it makes sense to cut the (Fed’s) policy rate by 25 basis points two weeks from now.” (Twenty-five basis points equals one quarter of an interest rate point.)

What is clear is that the current 4.33% median Fed funds target rate remains well above the inflation trend. Even after the acceleration in consumer prices in June, the policy rate is roughly 1.4 percentage points above headline CPI’s one-year change – close to the biggest gap post-pandemic.

Christopher Waller, a potential contender to be the next chair of the central bank, said the Federal Reserve should not wait for the labor market to weaken to reduce interest rates.

With June's inflation reading coming in hotter than the month prior, the Fed is under renewed pressure to maintain its current target range for the federal funds rate. Analysts now see little chance of a rate cut in the near term. That means HELOC borrowers are unlikely to see significant rate drops anytime soon.

The report on wholesale inflation came a day after the Labor Department reported that consumer prices last month rose 2.7% from June 2024, the biggest year-over-year gain since February, as Trump’s sweeping tariffs pushed up the cost of everything from groceries to appliances.