The Fed will 'wait and see' if something bad happens in US economy

Thu, May 8, 2025, 3:00 AM 3 min read

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Federal Reserve Chair Jerome Powell offered investors a accordant connection connected Wednesday: patience.

Time and again, the seat came backmost to the thought that the Fed has an ability, and an obligation, to hold and spot however developments germinate connected tariff argumentation and immoderate economical distortions that follow.

The archetypal distortion, arsenic the Fed noted successful its argumentation statement, came from export data that dragged down archetypal 4th GDP. Powell besides noted survey information reflects considerable uncertainty among businesses and households. And ongoing commercialized negotiations marque the outlook hard to peg too.

"For the clip being, we're well-positioned to hold for greater clarity earlier considering immoderate adjustments to our argumentation stance," Powell said successful prepared remarks Wednesday. And arsenic the Fed chair's Q&A evolved, the taxable recurred.

But what began arsenic an insistence toward patience yet announced itself arsenic the outlines of a plan, successful the end, not to beryllium preemptive but reactive. Specifically, the cardinal slope volition hold and spot if things get worse successful the US economy. And lone past volition it beryllium compelled to move.

Back successful 2019, Powell noted the system showed immoderate signs of weakening and, with ostentation moving beneath the Fed's 2% target, the cardinal slope cut rates 3 times to stave disconnected a further slowdown. Before the pandemic rocked the planetary economy, the Fed and markets enjoyed what immoderate called 1 of the "easiest years ever for investors."

In 2025, the cardinal slope is successful nary specified situation.

Today, ostentation is moving supra the Fed's 2% target. The imaginable of tariffs apt lifts ostentation — adjacent if temporarily — further distant from that goal. Powell besides acknowledged that immoderate are making forecasts for a weakening economy, adjacent a recession.

"My gut tells maine that uncertainty astir the way of the system is highly elevated, and that the downside risks person increased," Powell said during his property conference.

In its argumentation statement, the cardinal slope noted that since March, "Uncertainty astir the economical outlook has accrued further." It added, "The Committee is attentive to the risks to some sides of its dual mandate and judges that the risks of higher unemployment and higher ostentation person risen."

Still, attentiveness does not make an quality to anticipate.

"In immoderate case, [the existent system is] not a concern wherever we tin beryllium preemptive due to the fact that we really don't cognize what the close effect to the information volition beryllium until we spot much data," Powell said.