Federal Reserve Faces Dilemma Amid Trump's Tariff Policies

According to BlockBeats, U.S. President Donald Trump's tariff policies have created a complex situation for the Federal Reserve, posing a dilemma between addressing economic recession or tackling stagflation. This week, Federal Reserve officials are holding a two-day policy meeting to carefully navigate these challenging decisions. Federal Reserve Chair Jerome Powell and his colleagues are likely to maintain a cautious stance, refraining from cutting interest rates while considering adjustments to their strategy. This "strategic patience" reflects the Fed's reluctance to prematurely abandon its commitment to combating inflation. The current challenge for the Federal Reserve is akin to a goalkeeper's dilemma: whether to "dive right" by keeping interest rates steady to curb inflation, or "dive left" by lowering rates to counter slowing economic growth. "We will make a very difficult judgment," Powell stated last month. If the Federal Reserve acts too soon, attempting to stimulate the economy before a slowdown occurs, it could exacerbate short-term inflation pressures caused by tariffs or commodity shortages. "This won't be a cycle where the Fed preemptively cuts rates due to anticipated economic slowdown. They need to see actual signs of slowing, particularly in the labor market," said Richard Clarida, who served as Powell's deputy for three years.