The Federal Reserve may need to see signs of U.S. private credit market instability before it is in a state of "fear" that could prompt action from the central bank, according to analysts at Macquarie.
Policymakers have recently suggested that they are waiting for more clarity around the broader economic situation in the wake of erratic tariff measures from U.S. President Donald Trump.
Earlier this month, Trump moved to slap steep reciprocal tariffs on a host of countries, arguing that it was necessary to correct longstanding trade imbalances and increase federal revenues. However, he later announced a partial 90-day pause to the elevated levies on most of these nations, in an apparent response to deep turmoil in both stock and bond markets.
The White House then temporarily halted duties on a range of tech-related products, such as smartphones and computers, largely coming from China. Trump has also floated potentially granting exemptions to car-related imports.
Still, universal 10% tariffs on many countries remain in place, as well as trade taxes on items like steel, aluminum, autos and auto parts.
China was also left out of Trump’s reciprocal tariff delay, ratcheting up a trade spat between the world’s two largest economies. The president has placed a 145% tariff on imports from China, sparking a retaliatory 125% levy from Beijing.
Media reports, meanwhile, have suggested that sector-specific duties on electronic products, semiconductors and pharmaceuticals could soon be implemented. Commerce Secretary Howard Lutnick has said an investigation into these industries that may be a precursor to future tariffs could wrap up "in the next month or two."
Fed Chair Jerome Powell has said there has been a lot "waiting and seeing going on," including by the Fed, against this backdrop.
Powell added that this tactic seemed "like the right thing to do at a time of elevated uncertainty" -- a statement that was interpreted as an indication that the central bank may not rush to slash interest rates should the tariffs spark a broader economic crisis.