The traditional way to approach projecting the economy is to describe a baseline scenario — what seems like the most likely trajectory — with risks on either side.

• That may not be the best way to think of the outlook right now, a top Fed official tells Axios.

The big picture: With uncertainty around both what trade and other policy changes will bring, and how they will affect employment and inflation, Hammack is thinking about a range of distinct economic scenarios, rather than one base case.

• She and other leaders of the central bank will submit their projections for GDP, inflation, interest rate policy and more next month. It's an especially fraught time to be doing so, given complex policy crosscurrents around trade, tax and other policies.
• The so-called Summary of Economic Projections will be published when the Fed's next two-day meeting concludes on June 18.

What they're saying: "I'm grateful that I have four weeks to work on coming up with a modal case, because right now I haven't really been operating with a base case," Hammack said. "I've been operating in a couple different scenarios."

Scenario 1: Tariffs have a one-off price effect, but economic growth takes a hit from policy uncertainty.

• The possibility that tariffs bring up price levels, but don't do so consistently, results in a one-time increase in prices.
• But Hammack says this might come alongside a "tremendous amount of uncertainty that weighs on economic activity," with growth declining and the labor market falling off.
• "In that situation, we'd want to be attentive to the employment side of our mandate and potentially ease policy — and potentially very quickly, if we had the evidence that this is what was happening," she says.

Scenario 2: The labor market holds up, but tariffs are inflationary.

• It's possible that businesses hold the line on their workforces, a pandemic-era fear that they might not be able to replace staff when the economy bounces back.
• "Because it took them so long and it was so difficult to hire and train their staff over the past several years, it could be the case that they hold on to people for a really long time," Hammack says.
• She adds that in this scenario, price pressures from tariffs become sticky because of the way the levies have been rolled out.
• "It becomes more persistent and more inflationary because the tariffs are layered in — the announcement, the withdrawal, and then the possibility of new announcements," Hammack says.

Scenario 3 is what Hammack sees as most likely: a stagflationary outcome where the economy slows alongside higher inflation.

• "That's where it's really difficult for monetary policy," Hammack says.
• "We're going to have to have good insights and good understanding of how much we're missing each side of the mandate and how long those misses persist — and then we can decide what the right course of action is."

Go deeper

White House economists project that the budget legislation pending before the House will, if enacted, contribute to a stunning rise in the economy's growth path.

• Their numbers are eye-popping — and far higher than those that analysts outside the Trump administration are projecting.

Driving the news: In its new analysis of the "big, beautiful bill" that has cleared a key committee and will now go to the floor of the House, the White House Council of Economic Advisers finds that it would add 4.2% to 5.2% to GDP in the short run.

• They put that number at 2.9% to 3.5% in the long run.
• They see the legislation boosting investment by 10% to 15% in the next four years, and boosting wages by $6,000 to $11,000 per worker.

What they're saying: "All of this is a result of low tax rates incentivizing additional labor supply, incentivizing additional investments by firms, and incentivizing additional manufacturing capacity at home," CEA chair Stephen Miran told reporters yesterday.

Reality check: Numbers of those magnitudes are a distinctly non-mainstream conclusion, even among analyses that do find some growth boost from the legislation.

• The Tax Foundation, a center-right think tank, finds that the version of the legislation that passed the House Ways and Means Committee last week would add 0.6% to long-run GDP.
• The Penn-Wharton Budget Model puts the gain at 0.5% over the next 10 years and 1.7% in 30 years.

Between the lines: A big difference between the White House economists' findings and those of other analysts is that the CEA analysis sees big supply-side gains from some of President Trump's campaign-trail tax promises not built into more mainstream models.

• "I want to emphasize that the segments of the labor force being targeted by some of those tax provisions, particularly no tax on overtime and no tax on tips, these are workers that are highly elastic and therefore highly responsive to changes in incentives," Miran said, which means the policies could help boost the economy's supply side.