Jerome Powell says the Fed can afford to ‘wait and see’ before cutting rates. Other economists aren’t so sure

• Federal Reserve has not yet cut interest rates In 2025 because it was looking for more clarity on the effects of President Donald Trump's tariff policy. While Fed chair Jerome Powell suggested in a “good position” to act precisely as needed, some economists remember that this method could make the central bank slow to respond to a collapse.

Consumer's sentiment collapsed amid trading uncertainty, Federal Reserve Chair Jerome Powell identified Wednesday, and commentary to the Central Bank's own Central Bank “Beige book“It suggests that businesses have felt the effects of President Donald Trump's tariffs.

Fed policy manufacturers have not been transferred to this “soft data,” however, and interest rates have not been transferred to this year. After the central bank's latest decision to keep the federal fund rate stable between 4.25% and 4.5%, Powell told reporters that he and his colleagues were ready to act specifically-but not until the so-called “hard data” in unemployment and inflation gives them a clear reason.

“See the state of the economy,” he said. “Working is stable, inflation is low. We can be patient as things open. There is no real cost of our wait at this point.”

Other economists, however, note that a “wait-and-see” approach carries its own risks.

“Central banks who retaliate instead of pre-empt data tend to be late to policy change,” said Paul Donovan, chief economist at UBS Global Wealth Management. “Economic data is especially less reliable, making the dependency of data more dangerous.”

So far, however, Powell thinks that the key steps of economic conditions are to buy important Fed time. The job reports for April came louder than expected last week, that the unemployment rate remains low, the Fed chair mentioned, by 4.2%. Prefer the middle bank Inflation proposal It also drops, even though it remains above the Fed's 2% target.

“It's still a healthy economy,” Powell said, “even one covered with some very Downbeat sentiment on the part of people and business.”

Meanwhile, other economists, warned that the signs of a backward are already cooking in the country ports amid a dramatic slowdown in shipping, especially between the US and China. Torsten Sløk, chief economist in private giant equity Apollo, predicted mass disappearances can hit the industry this month and avoid a summer contraction.

“We see shipping data, we see everything,” Powell said.

However, he cited the possibility of trade talks that were changing the situation, a day before Trump announced an agreement with the UK Meanwhile, Treasury Secretary Scott Bescent and US trade representative Jamieson Greer would meet with Chinese counterparts this week; Bessent has previously said that the current standoff between the two largest economies in the world is not sustainable.

Powell added that the Fed does not have to rush because the rate of federal funds, the traditional weapon of financial policy, remains “moderate restriction.” In other words, the central bank may lower the rates quickly and noticeably as needed, providing it a lot of ammunition if a fall is materialize.

“Data can move fast or slow,” he said, “but we think we are in a good position where we will allow things to change and be clearer.”

Stagflation fears are constantly restrained

The more uncomfortable message, however, may have felt the Fed had no choice but to stand up and watch what would open like the others. The central bank mentioned Risks in both higher unemployment and increased inflation increased, indicating in the worst case of “stagflation.”

If tariff interruptions end up causing both runaway price growth and unemployment increases, the central bank's conundrum is the solution to one of those problems usually exacerbates the other. When inflation rises, the Fed walks interest rates to cool the economy. But when unemployment rises, the bank does the opposite and breaks the rates to stimulate growth.

When both variables advance to the tandem, it creates a “complex and challenging judgment,” Powell said. He emphasized that such a scenario is not yet played.

“The analysis is, you wait,” said the Fed's seat.

When PUSH is shaking, many on Wall Street believe the Fed will prioritize supporting the labor market. Businessmen are currently pricing three to four cuts by the end of the year, according to CME Group's Fedwatch toolThe Fed project holds rates that are stable again in June before the 25-point cuts in July.

So far, however, the Fed felt in two directions, Chris Zaccarelli, chief investment official in Northlight Asset Management in Charlotte, North Carolina.

“As such, the Fed will have to wait for the unemployment to spike before they continue to cut the rates,” he wrote on a note Wednesday, “and at that point it may be too late.”

It also means that the Central Bank will try to play, Matthew Pallai, chief investment official in Nomura Capital Management, said.

“Perhaps the fiscal policy is better suited for this constellation of risks than the financial policy,” Pallai wrote on a Wednesday Wednesday note. “Managing interest rates can too dull a tool to navigate between two obstacles.”

This story was originally featured on Fortune.com