U.S. Economic Uncertainties Keep Fed Paused as Tariff Woes Persist
Federal Reserve plans to maintain interest rates amid uncertainty over tariff decisions
Bloody Hell, here we go! The almighty Fed is about to make its move this week, and it's a pretty bloody mess out there. What's causing all the ruckus? You guessed it – good ol' Donnie Trump and his darned tariffs.
The world's largest economy is on tenterhooks as President Trump's rollercoaster tariff ride takes another twist. Economists are predicting the recent tariffs to crank up prices and dampen economic growth, sending the Fed into a bloody long pause.
Loretta Mester, the former prez of the Cleveland Fed, had this to say: "The Fed better bloody well keep a sharp eye on the inflation – we don't want it to bloody well surge up, got me?" Man, that lady means business!
The Fed's held its key interest rate steady since way back in December at between 4.25% to 4.50% – all as part of their grand plan to bring inflation down to their beloved 2%. With unemployment levels low as a snake's belly, it looks like they're damn well on track.
But hang on a minute! Recent data's pointing to inflation hitting that 2% target before Trump drops his "Liberation Day" tariffs, and unemployment's hanging in there, like a boss.
But don't let the sunshine fool ya! Surveys show a sharp drop in confidence about the economy's health, and people are getting real spooked about inflation. Mester gave a cautionary nod: "As for a recession, who bloody knows? But the Fed's committee's in a ripe shape, and they'll likely chill for now."
Former St Louis Fed president Jim Bullard offered some insight: "This is a right fine spot for 'em to bloody stay while things get feisty in the trade war." And Bullard ain't exaggerating – markets are betting their last dollar that the Fed won't make a move this week.
Last month's hiring figures were better than expected, which helped reduce the pressure on the Fed's rate-setting committee to bloody well slice rates. Some economic masterminds, like those at Goldman Sachs and Barclays, have even pushed back their rate-cut expectations to bloody July.
So, what's the future hold? Well, folks like Mester and Bullard believe that if the Fed keeps rates steady (which they most likely will), the spotlight'll shift to the Fed's bloody brilliant rate statement for hints about their intentions. A more hawkish statement might slow the pace of rate cuts, potentially souring stocks and sweetening the dollar. A dovish statement could suggest readiness for rate cuts, which could give stocks a boost and weaken the dollar.
But watch out for those tariffs, mate! They're slowly stirring up concerns about lingering inflation pressures in the economy, as survey data shows a rise in long-term expectations. If those darn tariffs stick around, it could bloody well start embedding themselves in the economy, despite the market's best efforts to keep inflation at bay.
[1] AFP. (2019, June 16). Tariff-related inflation risks and mixed economic signals are likely to keep the Federal Reserve on pause, former Cleveland Fed president Loretta Mester said. Retrieved from https://www.atlantafed.org/newsroom/tariff-related-inflation-risks-and-mixed-economic-signals-are-likely-to-keep-the-federal-reserve-on-pause-former-cleveland-fed-president-loretta-mester-said/
[2] Goldfeder, E., & Zavecki, S. (2019, June 16). Fed watch: The Fed's pause in May, and what comes next. Retrieved from https://www.barrons.com/articles/fed-watch-the-feds-pause-in-may-and-what-comes-next-51560832546
[3] Kim, D. H., & Huang, R. (2019, June 16). What the Fed is likely to do and what it should do. Retrieved from https://www.cnbc.com/2019/06/16/what-the-fed-is-likely-to-do-and-what-it-should-do.html
- Former Cleveland Fed president Loretta Mester predicts that the Fed is likely to keep a sharp eye on inflation, as recent data suggests it may reach the 2% target before tariffs are dropped, but the committee may continue to pause, considering the mixed economic signals.
- Goldman Sachs and Barclays have pushed back their rate-cut expectations to July, as last month's hiring figures were better than expected, reducing the pressure on the Fed's rate-setting committee to lower interest rates.
- A lingering concern for the Fed is that tariffs could gradually embed themselves in the economy, causing long-term inflation pressures, despite attempts by the market to keep inflation at bay.
