The approach of Fed’s Wait and See is not out of place as a cloud economic outlook
U.S. tariffs and the Middle East: When will we know? When will the data from the early 1980s reveal the onset of a recession?
Mr Clarida, an investment firm adviser, said that there hadn’t been U.S. tariffs at these levels in his lifetime. That is not something we will know until we see it in the data.
Absent the conflict in the Middle East, Richard Clarida, a former vice chair at the Fed, thought the odds of a such a cut later this year had risen compared with just a couple of months ago, when he had thought the labor market would have to crack for the central bank to cut rates. Most companies have not raised prices because they are not sure how tariffs will affect them. Businesses that keep their customers out of their way could mean inflation will be more contained in the future. But it is too early to know for certain.
The path to lower borrowing costs, which Mr. Trump has been demanding with increasing urgency since returning to the White House, has never been straightforward because of his tariffs.
That is likely to prompt the Federal Open Market Committee, the 12-person group that votes on policy decisions each meeting, to wait a bit longer “to observe how this plays out” before sending a clear signal about its next move on interest rates.
The Federal Reserve is expected to hold interest rates steady Wednesday, as policymakers wait to see how President Trump’s tariffs and fighting in the Middle East will affect the U.S. economy.
“Cloudy with a chance of showers? Fed’s economic forecast coming today”: a comment on the U.S. attack on Iran
Israel’s attack on Iran last week added a new wrinkle to the outlook by triggering a spike in crude oil prices. If sustained, that could jeopardize the drop in gasoline prices that has helped keep the overall cost of living in check.
“Nice numbers!” Trump wrote in all caps on social media, after a report showed that Consumer prices rose only 2.5% over the last year. “FED SHOULD LOWER ONE FULL POINT.”
The government’s own borrowing costs are set by the bond market, which is not directly tied to the short-term rates set by the Fed. And those borrowing costs have only risen in recent months.
Bond yields ordinarily fall during times of turmoil, as investors flock to the safety of U.S. government debt. But yields on Treasury bonds unexpectedly rose last week after Israel’s attack on Iran, suggesting investors are not as confident in the U.S. government’s creditworthiness as they once were.
High debt and rising bond yields are costly to the government and to taxpayers. Social Security and Medicare are the biggest expenses for the government, but interest on the federal debt is the third-biggest expense.
Source: Cloudy with a chance of showers? Fed’s economic forecast coming today
Implications of Donald Trump’s Policies on Taxes, Regulation and Immigration: The Fed is Monitoring the Rise and Fall of the Immigrant Sector
The Fed is keeping an eye on the effects of Trump’s policies on taxes, regulation and immigration. Tax cuts and deregulatory moves have the potential to boost the economy while strict border controls and large-scale deportations could make it harder for businesses to find the workers they need.
Fewer immigrant workers could “add meaningful upward pressure to inflation by the end of the year in sectors reliant on immigrant labor such as agriculture, construction, food processing, and leisure and hospitality,” Fed Governor Adriana Kugler warned in a speech this month.
