The Federal Open Market Committee (FOMC) voted last week to keep the federal funds rate steady within the range of 4.25% to 4.5%. They also decided to slow down the pace of reducing their balance sheet.
This decision to keep rates unchanged comes against a backdrop of Trump’s wildly ambitious, consistently erratic economic policies. The man who promises to bring peace by escalating trade wars creates a cocktail of inflationary pressures that would make any central banker’s head spin.
Powell explained, “Inflation has started rising partly due to tariffs. And there could be a lag in the progression of Inflation over this year.” Translation: The chaos Trump is stirring up won’t settle anytime soon.
Federal Reserve Chair Jerome Powell must be getting used to operating under “extreme uncertainty”—a phrase that has become synonymous with life under the Trump administration. During a press conference, he politely reiterated that the central bank was in no hurry to adjust borrowing costs. Indeed, why rush, after all, when your President’s policy playbook resembles a roller coaster designed by a drunk engineer?

The Fed’s official line is that the inflation spike is “transitory”—financial jargon for “We’re hoping it goes away by itself.” However, Powell, never one to overpromise, admitted it was difficult to untangle how much of the tariff-related inflation problem is caused by Trump’s economic grenade tossing and how much is the natural result.
The latest economic projections from the Fed show reduced growth estimates for 2025 and increased inflation expectations. Simply put, the economy is slowing down while prices are doing the opposite.
The Fed’s median estimate for core inflation, which conveniently ignores volatile food and energy prices, is now 2.8% for the end of the year, up from 2.5%. Growth estimates for 2025 have been slashed from 2.1% to 1.7%, and the expected unemployment rate has increased to 4.4% from the previous estimate of 4.3%.

The Fed has been holding rates steady this year after cutting them by a percentage point in late 2024. Since December, Powell and his colleagues have been desperately trying to figure out whether Trump’s policies are the equivalent of a mild cold or a full-blown plague. They’ve chosen to wait for more clarity.
Meanwhile, Inflation remains high, consumer expectations for future price growth are soaring, and consumer confidence is plummeting like a stone. Powell acknowledged that the risks of recession have increased but reassured everyone that they weren’t “elevated, ” as if that’s supposed to calm anyone’s nerves.
The ever-optimistic Fed chair dismissed the University of Michigan’s alarming findings on long-term inflation expectations as an “outlier.”
“We understand sentiment has deteriorated significantly, but economic activity hasn’t yet declined, and we’re watching the situation closely,” Powell explained. In other words, the Fed is squinting through the fog of Trump’s trade tantrums and hoping to make out something that resembles reality.

As if the Fed didn’t have enough to worry about, they’ve also announced that starting in April, they’ll reduce the monthly cap on Treasuries from $25 billion to $5 billion. It’s a minor change but shows the Fed’s growing concern about potential pressure on money market rates.
With Trump’s wild economic policies making life miserable for central bankers, the Fed’s decision-making process increasingly looks like a guessing game. Investors have already poorly reacted to the prospect of an economic slowdown, with the S&P 500 dropping over 10% since mid-February before partially recovering.
Even Trump’s attempts to reassure everyone have backfired. Declaring that the US is in a “transition period” isn’t exactly the sort of rallying cry that brings markets back to life. But, as always, Trump’s strategy seems to be to throw everything at the wall and see what sticks.
Will the Fed be able to keep the ship steady amid Trump’s economic tidal wave? Or will the President’s reckless policies finally push the US economy over the edge? Unfortunately, this circus is far from over.