Jerome Powell, Chair of the Federal Reserve, emerged from another two-day policy meeting in Washington this week sounding like a man politely trying to defuse a bomb, with one hand behind his back and a president shouting at him through a megaphone.
In his post-meeting remarks, Powell struck a tone somewhere between caution and barely concealed exasperation. “If the substantial tariff hikes that have been announced actually stick,” he explained, “we could see inflation spike, economic growth sag, and unemployment creep higher.” This is a classic lose-lose-lose, courtesy of the White House’s trade crusade.
He did offer the usual central bank hedging: the inflationary impact might be short-lived… or not. In the understated world of Fed-speak, that translates to: “Your guess is as good as ours.”
The Fed left interest rates untouched at 4.25–4.5%, where they’ve languished since December, while the official communiqué practically sighed: “Uncertainty around the economic outlook has increased.” Translation: “We have no idea what happens next, and frankly, neither do you.”
The Fed is not in a hurry to raise rates, and for good reason. With Trump’s tariffs simultaneously poking inflation and job markets and the global slowdown pulling them down, the Fed finds itself awkward in choosing between inflation containment and economic support.
Maintaining his best poker face, Powell reiterated the Fed’s approach: wait, watch, and above all, do nothing hasty. “We’re not in a rush,” he said. “Patience is appropriate.”
Meanwhile, President Trump has been generously dispensing advice from the sidelines (read: social media), at one point suggesting Powell should be fired—somewhat ominously before backtracking. It’s the economic equivalent of heckling your pilot mid-flight and insisting you just offer friendly feedback.
The Fed is committed to letting its balance sheet unwind at a snail’s pace, keeping caps on Treasury and mortgage-backed security runoff unchanged. Behind the scenes, policy is being quietly managed.
All this comes as the US economy begins to creak under the strain. GDP contracted in Q1 for the first time since 2022, although consumer spending and labour markets still appear stubbornly resilient, for now. Businesses have rushed to import goods before tariffs bite, while households are frontloading purchases to avoid future price surges. Economic indicators? Confused, crowded, and contradictory.
Of course, Powell and his colleagues know that tariffs are taxes in disguise. And these particular taxes arrive not only with zero economic justification but with maximum geopolitical drama.
But the Fed, in its genteel technocratic manner, can’t say that outright. So it waits—for more data, for more clarity, for the next tweet—all the while hoping not to become the scapegoat when things go south.
In short, the Fed is dancing blindfolded on a tightrope above a pit filled with flaming tariffs and the ghosts of central bankers past. For the moment, Powell is doing everything he can to stay balanced while pretending the rope isn’t on fire.