Aniket PujariUS Fed chair Powell said that the US Federal Reserve is likely to keep its benchmark interest rate unchanged in the coming months as it waits for widespread uncertainty stemming from Donald Trump’s policies.
When Federal Reserve officials last met in late January, things looked pretty good: Hiring was solid. The economy had just grown at a solid pace in last year’s final quarter. And inflation, while stubborn, had fallen sharply from its peak more than two years ago.
As the Fed prepares to meet Tuesday and Wednesday, the central bank and its chair, Jerome Powell, are potentially headed to a much tougher spot. Inflation improved last month but is still high and tariffs could push it higher. At the same time, ongoing tariff threats as well as sharp cuts to government spending and jobs have tanked consumer and business confidence, which could weigh on the economy and even push up unemployment.
The combination of still-high inflation and a weak or stagnant economy is often referred to as “stagflation,” a term that haunts central bankers. It is what bedeviled the United States in the 1970s, when even deep recessions didn’t kill inflation.
Stagflation, should it emerge, is hard for the Fed because typically policymakers would lift rates — or keep them high — to combat inflation. Yet if unemployment also rises, the Fed would usually cut rates to reduce borrowing costs and lift growth.
