The Breakdown The Fed Is Stuck Waiting While the Trade War Reshapes the Economy
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May 9, 2025 The Federal Reserve remains cautious, opting for a 'wait and see' approach amid economic uncertainties. Tensions rise as trade negotiations with China intensify, revealing conflicting signals from U.S. leadership. Discussions highlight how the trade war is reshaping global economics, intertwining trade with capital investment restrictions and national security. The evolving global landscape could redefine America's economic strategy beyond mere trade disputes.
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Fed Embraces Wait-and-See
- The Fed adopted a wait-and-see approach after the latest FOMC meeting, avoiding policy changes due to economic uncertainties.
- They acknowledge rising risks of both higher inflation and unemployment from the ongoing trade war impacts.
Powell's 'Wait and See' Mantra
- Powell emphasized uncertainty, repeatedly using "wait and see" to describe Fed's cautious stance.
- The Fed avoids rushing policy moves despite some volatile data signals, prioritizing clarity before acting.
Inflation and Employment in Conflict
- The Fed faces a rare challenge where its dual mandate goals—inflation and employment—may conflict due to trade shocks.
- Powell hinted some policy cuts might happen this year, but timing depends entirely on emerging economic outcomes.