(Yahoo!Finance) - Fed Chair Jerome Powell said Wednesday that he doesn't know anyone who is confident in their forecast these days.
But what he did say with assurance was that the central bank will be ready to respond once the tariff uncertainty becomes enacted policy.
"It's appropriate to wait for further clarity," he said at the end of the March policy meeting. "And the costs of doing that, given that the economy is still solid, are very low."
In a message that reassured the market, and to a certain extent the White House, Powell appeared to take lessons from the Fed's pandemic response. Where the central bank was previously mistaken to believe that COVID's inflationary pressures would be "transitory," Powell has now advanced the argument that the impact of tariffs could be a one-time event.
"We are well aware with what happened with the pandemic inflation. But we have to look at this as a different situation," he said. "We'll be adapting as we go."
Powell’s continued wait-and-see approach makes sense when uncertainty reigns over Washington and Wall Street. But to investors who have been waiting for the next rate cut, April’s widening tariff rollout may delay the Fed’s next intervention, though Fed officials predict two cuts by the end of 2025. Some analysts have argued that if Powell hasn’t already attempted to front-run the tariffs, it’s possible the year won’t see a single cut.
If the cuts do arrive, they may not feel the same. Easing rates because inflation is slowing and the economy is humming along, as the Fed did last year, isn't the same as a reactive cut to diminished growth and a weakening labor market — a potentially bumpier landing indeed. But as Powell said in so many words, who's to say what's coming?
And with decent economic hard data, despite the poor morale, the Fed's pause doesn't have to be a meaningful judgment but rather a delay, continuing to bide time even as Wall Street and other observers have started to jitter.
That time could be useful, as the impact of Trump’s tariffs could squeeze the Fed in two directions at once, besetting business owners with higher costs and slower growth. That places the Fed's goals, as Powell put it, in "tension," with the difficult mandate of balancing the two. When asked about this, the chair pointed to the Fed's consensus statement, which noted that the FOMC sees long-term inflation expectations as solidly enough at 2% to "enhance" its ability to react "in the face of significant economic disturbances."
Whether tariffs create one of those is anybody's guess.
By Hamza Shaban · Senior Reporter
