The Fed is in wait-and-see mode — and this is not just a "pause", but a forced strategic waiting tactic. The minutes from the last meeting clearly show: economic uncertainty has increased to such an extent that even the hawks on the committee agreed — better not to rush.
The main headache is tariffs. After Trump's escapades on the foreign policy front and yet another friction with China, the Fed found itself caught in a crossfire: on one side — inflation, on the other — the risk of rising unemployment. Moreover, both can very well happen simultaneously. A double whammy.
The Fed is currently acting with utmost caution: the rate remains in the range of 4.25–4.5% for the third time in a row. The scenario: “better to wait until all this trade mess clears up a bit.” The political swings from Washington are making it too difficult to see where the economy is really headed.
Even despite the temporary easing of tariffs between the US and China, business is still slowing down: investments are on hold, hiring is too. The Fed sees this and lowers its forecasts for 2025–2026. Moreover, in their internal model, the probability of recession has almost equaled the baseline scenario. This is no longer a warning bell — this is a siren
