Fed officials signal no plans to ride to the rescue with rate cuts

Source: Reuters

April 9, 2025 5:18 PM EDT Updated 11 hours ago


April 9 (Reuters) - Federal Reserve policymakers worry U.S. President Donald Trump's trade policy could deal a blow to economic growth, but are signaling they will not be quick to ride to the rescue with interest rate cuts because they expect higher tariffs to boost inflation.

The minutes of the U.S. central bank's mid-March meeting, released on Wednesday, showed that Fed officials already felt they were operating in a thickening cloud of uncertainty that had the potential to slow consumer spending and business investment and also called for a cautious approach on rate-setting.

That was before Trump's April 2 announcement of sweeping tariffs triggered a global stock market rout on fears of recession and a sharp rise in Treasury yields that raised alarm bells about potential financial market instability.

Trump's stunning reversal on Wednesday, walking back a chunk of those big tariffs, ignited a powerful relief rally in stock markets. But it did little to deliver the clarity policymakers say they need to act. "Uncertainty over trade will persist," economists at Citi wrote after Trump abruptly lowered tariffs to 10% for many countries for the next 90 days, even as he ratcheted up levies on Chinese imports to 125%.

Read more: https://www.reuters.com/markets/us/feds-musalem-sees-growth-slipping-below-trend-higher-inflation-risk-2025-04-09/