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“Uncertainty about the economic outlook has increased further,” said Federal Reserve officials in a statement following their meeting this week, at which they agreed to keep interest rates steady (The Wall Street Journal, subscription). That decision was widely expected, though analysts anticipate rate cuts in the latter half of this year.

Powell’s view: At a press conference following the meeting, Federal Reserve Chair Jerome Powell tempered expectations for guaranteed rate cuts in 2025, explaining that the Fed was not willing to take action before seeing more data.

• “It’s not a situation where we can be preemptive, because we actually don’t know what the right responses to the data will be until we see more data,” he said (CNBC).
• Furthermore, the Fed noted in its statement that risks to both sides of its dual mandate have risen, so they may find themselves in a scenario where their goals of full employment and stable prices are in tension.

Trade deals: Powell also added that any trade deals made by the administration would be key to determining the near future of the economy. 

• “It seems to be we’re entering a new phase where the administration is beginning talks with a number of our important trading partners and that has the potential to change the picture materially—or not,” Powell said. “It’s going to be very important how that shakes out.”