Powell To Keep Rates Steady, Avoiding Further Economic Instability

Stock markets are in free fall, and the geopolitical landscape is in turmoil as President Donald Trump enforces steep import tariffs, intensifies pressure on Russia and Ukraine, and even threatens to annex Greenland and Canada.

If he sees a slowdown on the horizon, cutting rates could be an option—but with inflation still above the Fed’s 2% target, such a move could be risky.

Against this backdrop, the key question for Federal Reserve Chairman Jerome Powell is: What will you do? Barron’s Daily journalist Brian Swint reported.

The answer: likely nothing. The probability of the Fed holding interest rates steady stands at 99%, according to the CME FedWatch tool. While some adjustments to the interest-rate outlook may occur, significant policy shifts are not expected.

That’s because, at this stage, the Federal Reserve has limited options. Economic indicators—although lagging—do not yet show significant shifts.

On paper, the U.S. economy remains strong, with solid growth, low unemployment, and controlled inflation. The Consumer Price Index (CPI) cooled to 2.8% in February, according to data released last week.

Even if Powell were inclined to act preemptively, the path forward is unclear. If he fears that tariffs will stoke inflation, raising rates prematurely could further dampen economic growth.

Conversely, if he sees a slowdown on the horizon, cutting rates could be an option—but with inflation still above the Fed’s 2% target, such a move could be risky. Either decision risks drawing Powell into political crossfire.

To be sure, should a full-scale crisis—akin to the 2008 financial meltdown or the COVID-19 pandemic—emerge, the Fed has tools at its disposal. But for now, Powell’s best course of action appears to be patience.