Jerome Powell says the Fed can afford to ‘wait and see’ before cutting rates. Other economists aren’t so sure

• The federal reserve has not said interest rates yet In 2025, it seeks greater clarity on the final effects of president Donald Trump’s tariff policy. While Federal Reserve Chairman Jerome Powell suggested that it is a “good situation” to act decisively if necessary, some economists worry that this approach may make the central bank slow to respond to contraction.

The feelings of consumers decreased amid uncertainty in commercial policy.

Policy makers at the Federal Reserve have not been transferred through “soft data”, however, interest rates have not been transferred this year yet. After the last central bank’s decision to keep the federal funds stable between 4.25 % and 4.5 %, Powell told the correspondents that he and his colleagues are ready to behave decisively-but not even alleged “difficult data” on unemployment and inflation gives them a clear cause.

“Look at the state of the economy,” he said. “The work is strong, and inflation is low. We can bear patient because things are revealed. There is no real cost to wait for us at this stage.”

However, other economists note that the “waiting and vision” approach carries its own risks.

“Central banks that interact instead of pre -data are delayed in changing policy,” said Paul Donovan, the chief economist at UBS Global Wealth Management. “Economic data is increasingly less reliable, making the data dependence more dangerous.”

However, at the present time, Powell believes that the main measures of economic conditions have bought a valuable time in the federal reserve. The Federal Reserve Chair indicated that the job report in April was stronger than last week, while the unemployment rate remained low. The preferred inflation scale for the central bank also decreased, although it is still 2 % higher than the FBI goal.

“The health economy is still,” if it is said in some very increasing feelings on the part of people and companies. “

Meanwhile, other economists warn that signs of recession are already brewing in the country’s ports amid a great slowdown in shipment, especially between the United States and China. Torrestin, the chief economist in the Apollo Special stock giant, expected that the mass demobilization operations will reach the industry this month and stimulate the recession by summer.

“We see shipping data, we see all of it,” Powell said.

However, he mentioned the possibility of commercial talks to change the situation, a day before Trump announced an agreement with the United Kingdom at the same time, the Treasury Secretary will meet Scott Payet and the American Trade Representative, Jameson Jarir, with their Chinese counterparts this week; Besent said previously that the current confrontation between the two largest economies in the world is not sustainable.

Powell added that the Federal Reserve does not need to be accelerated because the rate of federal funds, its traditional weapon for monetary policy, is still “moderately restricted.” In other words, the Central Bank can quickly reduce prices if necessary, giving it a lot of ammunition if the recession is achieved.

He said: “The data may move quickly or slowly, but we believe that we are in a good position where we let things develop and become more clear.”

Stagnation risk feed

However, the uncomfortable message may be that the Federal Reserve feels that it has no choice but to stand on Pat and watch what is revealed like anyone else. The Central Bank pointed to risks of high unemployment and high inflation, which led to a hint of the worst “stagnation” scenario.

If it ends with customs tariff mixtures, it ends up, which caused the growth of fugitive prices and increased unemployment, the central bank’s mystery is that the solution to one of these problems usually leads to the exacerbation of the other. When inflation rises, the Federal Reserve raises interest rates to cool the economy. But when the unemployment rises, the bank does the opposite and reduces the rates to stimulate growth.

Powell said that both variables are crowded side by side, as it creates a “complex and difficult rule.” He stressed that such a scenario has not yet succeeded.

“The evaluation is, you are waiting,” said the President of the Federal Reserve.

When Push To Shou comes, many believe in Wall Street that the Federal Reserve will give priority to support the labor market. Traders are currently pricing three to four discounts by the end of the year, according to the Fedwatch tool for the CME group, where federal reserve prices are displayed on fixed prices again in June before the reduction of 25 points in July.

Charlotte, Charlotte, Charlotte, Charlotte chief investment employee, said, however, the Federal Reserve is withdrawing in two directions.

“For this reason, the Federal Reserve will have to wait for unemployment to rise before the resumption of cutting prices,” he wrote on Wednesday, “By this point, the time may have passed.”

This also means that the central bank will try to play, said Matthew Balie, the chief investment official of Nomura Capital Management.

“The fiscal policy may be more suitable for this constellation of risks than monetary policy,” Balai wrote in the note on Wednesday. “Uppercide management may be a very frank tool for navigation between two decades.”

This story was originally shown on Fortune.com

2025-05-08 17:40:00