Since last rate cut, the Fed has been adopting wait-and-see mode to watch the economic evolving development closely, just because series of policies in terms of trade, immigration, fiscal policy and regulation advocated by Trump administration are creating much more uncertainties which will matter a lot for the economic outlook and the path of monetary policy.

Economic projections the central bank released Wednesday indicate that while officials see inflation moving up this year more rapidly than previously expected. The outlook spurred talk again about “transitory” inflation that caused a major policy headache for the Fed.

The position is significant with markets concerned that President Trump’s tariffs could spark a broader global trade war that again would make inflation a problem for the U.S. economy. With markets nervous over proposals for tariffs and other issues, Powell reiterated statements the Fed has made recently counseling patience on monetary policy amid the high level of uncertainty. “The net effect of these policy changes will matter for the economy and for the path of monetary policy. We will be watching all of it very, very carefully. We do not take anything for granted.”

That is implying the Fed is forced into a corner, the mandates which not only need to protect the economy from tipping into a scenario of stagflation, but keep the price at a relatively stable level are pretty tough. The Fed should focus on separating the signal from the noise as the outlook evolves. Maybe it is smart for the Fed to wait for greater clarity before any policy move, in order to avoid making any policy mistakes.

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