The Federal Reserve's plans for steady interest rate cuts to achieve a soft landing are now stalled due to the unpredictability of President Trump's trade war and its effects on the economy. Policymakers are weighing concerns over potential growth impairment against rising consumer prices, creating fears of stagflation. While current economic data seems strong with low unemployment, consumer sentiment has soured, raising doubts about the sustainability of growth. The Fed is closely monitoring various factors including tariffs, global reactions, and domestic fiscal policies as its strategy unfolds.
The Federal Reserve is now hesitant to cut interest rates further amidst uncertainty surrounding the economic impact of President Trump’s trade policies and rising inflation.
The nightmare scenario is inflation rising alongside a faltering economy, hinting at the potential return of stagflation, which complicates Fed policy decisions.
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