President Trump’s new tariffs—the highest in over 100 years—have put the Federal Reserve in a tough spot. These tariffs could cause two problems at once: higher prices for consumers and slower economic growth, with some economists even warning about a possible recession.
Wall Street traders think the Fed will cut interest rates four times this year starting in June, believing that a slowing economy will be the bigger concern. But experts disagree on what will happen: Morgan Stanley predicts no rate cuts because of inflation risks, while other analysts see many different possibilities. Fed leaders, including Vice Chair Philip Jefferson, are taking a cautious approach, saying they’re “in no hurry” to change rates while they watch how Trump’s trade, immigration, and spending policies affect the economy. Jefferson said they’ll keep the current interest rate (4.25%-4.5%) if the economy stays strong, but will adjust if jobs decrease or inflation falls.