All eyes on Powell as Fed grapples with Trump tariff dilemma

The Federal Reserve is extensively anticipated to carry rates of interest regular on the conclusion of its coverage assembly Wednesday, however the path ahead is something however sure for Jerome Powell.

Traders might be listening intently to the central financial institution chairman at a 2:30 p.m. ET press convention for any hints on future financial coverage actions after President Trump spent the previous few weeks repeatedly calling for the Fed to decrease charges whereas additionally lobbing insults at Powell.

Trump in current weeks referred to Powell as a “main loser,” “Mr. Too Late,” and a “complete stiff” in a sequence of social media posts. He additionally mentioned that Powell’s “termination cannot come quick sufficient” earlier than later clarifying that he had no intention of eradicating Powell earlier than the top of his time period in Might 2026.

Powell and his colleagues count on to be grappling within the months to come back with a vexing dilemma. They doubtless might want to resolve which aspect of their twin mandate to emphasise — value stability or most employment — as Trump’s tariffs doubtlessly push inflation larger and probably act as a drag on financial progress.

Powell final month made it clear he would look forward to extra readability earlier than deciding. Some Fed watchers count on him to do the identical at the moment.

“We count on the primary message from Chair Powell’s press convention to be that the [Federal Open Market Committee] is nicely positioned to attend for higher readability earlier than making any modifications to coverage,” mentioned JPMorgan chief economist Michael Feroli.

New stories on the economic system, jobs, and inflation launched final week strengthened the Fed’s conundrum because it appears for patterns within the knowledge.

A GDP report confirmed the US economic system contracted for the primary time in three years to start 2025 due largely to a rush by importers to beat the beginning of Trump’s tariffs.

However an April jobs report launched final Friday additionally confirmed the labor market remained resilient even within the weeks after Trump’s “Liberation Day” bulletins shook markets.

“We worry, sadly, that the close to excellent jobs report in April exhibits the economic system because it might have been within the absence of a tariff shock, and it could mislead policymakers into believing the economic system is extra resilient than it really is,” mentioned EY chief economist Gregory Daco.

As for inflation, a gauge favored by the Fed launched final week confirmed that value progress slowed in March to an annualized 2.6%, however it was nonetheless a hotter-than-expected 3.5% for the complete first quarter.

And each marks are above the Fed’s goal of two%.

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