The Fed's big Trump question
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Powell speaks at a press conference last month. Photo: Alex Wong/Getty Images
Expect the Fed to do its best to stay out of the headlines Wednesday, as the central bank is set to pause its interest rate cutting and start a waiting game to see where things go next.
Why it matters: The outlook is cloudy, with inflation proving stubborn and the impact of President Trump's immigration and trade policies uncertain.
- It puts the Fed in a tricky position: Officials don't want to be seen as commenting on White House decisions, but also are charged with guiding an economy that will be shaped by them.
- Trump has revived familiar calls for the Fed to lower rates, but chair Jerome Powell will likely seek to emphasize the central bank's attention to data as a driver of its decisions, rather than the president's words.
What they're saying: "The impression will be that it may well require an extended time-out through June before the fog clears and the Fed has the visibility it needs to consider a further cut," Evercore ISI's Krishna Guha wrote in a note.
- Powell, he wrote, "will continue to try to frame the debate mostly in terms of what we are learning from the data rather than Trump shocks, when we all know that the shocks are the main source of uncertainty."
Driving the news: Trump's spat with Colombia over the weekend shows the fast-changing nature of economic policy in the White House.
- For a few hours Sunday, it looked like the first victim of Trump-era tariffs would be a long-standing Latin American ally. The standoff ended when the country's president agreed to accept planes carrying migrants.
The intrigue: The episode offers some insight into how Trump 2.0 thinks about tariffs — and why attempts to model trade war economic impacts might be futile.
- Trump showed he is willing to use one economic policy (tariffs) to enforce another (deportation) — even if that country has a trade surplus with America.
- But that threat never ultimately materialized, though the White House said it would keep the draft order to invoke tariffs on hand.
What to watch: The Fed won't publish new economic projections at this week's meeting, but one key question is how the outlook has shifted — if at all — since last month.
- Minutes from December's meeting showed officials were concerned that trade and immigration policies would stoke inflation and potentially prevent the Fed from cutting rates further.
The bottom line: If Powell gets his way, this might be the least newsy press conference we have seen in a while.
- "We expect him to be as diplomatic as is possible, while firmly committing to Fed independence," Ajay Rajadhyaksha, an economist at Barclays, wrote in a note.
