FOMC preview - "Fed confronts lose-lose scenario amid haphazard tariff rollout" ...Middle East

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Timiraos argues that the chaotic implementation of President Trump’s tariff policy is creating a difficult dilemma for the Federal Reserve:

either risk a recession or grapple with stagflation.

This policy bind will be a central focus at the Fed’s upcoming two-day meeting, where officials are expected to maintain their cautious stance on interest rate cuts.

Fed Chair Jerome Powell and his colleagues are set to reiterate their wait-and-see approach, underscoring their reluctance to ease policy too soon and risk undermining progress on inflation. As Powell put it last month, “We’ll make what will no doubt be a very difficult judgment.” The situation has been likened to a goalkeeper’s dilemma—either stand firm to contain inflation or move quickly to support a weakening economy. But the Fed remains wary of acting pre-emptively, especially with tariffs threatening to raise short-term inflation through supply disruptions. “This is not going to be a cycle where the Fed pre-emptively cuts because there’s a forecast of a slowdown,” said former Fed Vice Chair Richard Clarida, now at Pimco. “They’re going to actually need to see it in the tangible data, in particular the labor market.”

The article is much longer and in depth, if you can access it the link is here.

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The FOMC statement is due at 1800 GMT on Wednesday, May 7, 2025 91400 US Eastern time)

Federal Reserve Chair Powell speaks a half hour later This article was written by Eamonn Sheridan at www.forexlive.com.

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