The US Federal Reserve is set to meet under a cloud of concern about the economic hit from President Trump’s tariffs, which has put the central bank in an uncomfortable spot. The Fed is expected to hold interest rates steady at 4.25-4.5 percent, but officials are struggling to navigate the uncertainty surrounding the administration’s policies.
President Trump’s aggressive tariff pronouncements and spending cuts have led to a toxic combination of high inflation, stagnating growth, and rising unemployment. While outright stagflation remains unlikely, the Fed is grappling with the risk of a weakening economy.
Economists warn that the uncertainty around tariffs is already biting, with consumer sentiment plunging in March for a third straight month. Tariff talk has skyrocketed on corporate earnings calls, with chief executives warning about slumping demand and rising prices.
The Fed’s policy decisions will be increasingly difficult if the economy starts to crack and inflationary pressures grow. This risks putting the central bank more squarely in the crosshairs of Mr. Trump.
Experts say the Fed is facing a tough hand, with no control over the backdrop of policy uncertainty and volatility surrounding the discussion of tariffs. The institution’s political independence is also under threat from President Trump’s attempts to encroach on its autonomy through executive orders.
The outcome will be critical in determining how the Fed outlines its policy path.
Source: https://www.nytimes.com/2025/03/17/business/economy-inflation-fed-trump.html