Federal Reserve Signals Patience
Facing the current complex economic situation, Federal Reserve officials have expressed the need to maintain flexible policies. Atlanta Fed President Bostic noted in an article that the overall U.S. economy is healthy, but uncertainties brought by the trade war suggest that the wisest strategy for the Fed is to be patient. He emphasized that there is not yet sufficient evidence to support a significant policy shift, especially as core inflation remains above the 2% target.
He also revealed that, based on the March quarterly forecast, there might be an interest rate cut in 2025, provided that the impact of trade policy gradually fades and inflation data shows significant improvement.
Monetary Policy Remains Flexible
Fed Governor Cook stated in a public speech that the current monetary policy is flexible enough to handle various future economic scenarios, including maintaining, raising, or lowering interest rates. She pointed out that trade uncertainty is impacting manufacturing, investment confidence, and equipment orders.
Cook predicts that the U.S. economic growth rate in 2025 will be significantly lower than last year, but relevant data needs to be closely monitored.
Pressure from Tariff Policies Grows
As the Trump administration continues to pressure global trade, the U.S. economy faces multiple challenges. Cook stated that the price impact of tariffs might be delayed, and businesses may pass costs onto consumers in the coming months, leading to sustained inflation.
Chicago Fed President Goolsbee also warned that price data will respond in the short term, with some product prices likely to rise within a month.
Employment Market Shows Signs of Weakness
According to the JOLTS report, job openings and layoffs increased in April. While economists have not yet deemed it a full weakening, the market is closely watching the upcoming May employment report. Analysts note that companies are observing cautiously and are reluctant to make large-scale layoffs in the short term unless economic downturn risks increase further.
