On Thursday (April 25th), senior officials of the Federal Reserve made intensive statements, clearly stating that there is currently no need to adjust monetary policy. Both Director Waller and Cleveland Fed Chairman Hamack emphasized the need to wait for more data to evaluate the actual impact of Trump's tariffs on the economy. Waller pointed out that the effect of tariff policies will not be apparent until this summer at the earliest, so the possibility of an immediate policy shift is extremely low

The 'bullet effect' of tariffs: is inflation just a flash in the pan?

Waller repeatedly emphasized that tariffs may only trigger a "one-time price increase" rather than sustained inflation. He analyzed that although the rise in import costs has pushed up prices, the shrinking consumption, declining employment, and shrinking household wealth will partially offset this impact, and "the final inflation rate may be lower than market expectations". However, he also admitted that this judgment requires great courage - during the pandemic, the Federal Reserve misjudged "temporary inflation" and suffered a severe blow.

Key contradiction point: If economic data suddenly deteriorates (such as a surge in unemployment or a sharp drop in consumption), Waller said he will not hesitate to adjust interest rates and "will not worry about whether inflation is short-lived".

Market vs Federal Reserve's' Patient Game '“

Recently, several Federal Reserve officials have unanimously called for 'patience', but financial markets have bet on a rate cut within the year. The minutes of the March FOMC meeting also hinted at the possibility of loose policies, while tariffs have increased the difficulty of decision-making - inflation and economic weakness require vastly different policy tools to address.

Hamak bluntly stated in an interview, "It's too early to take action before June." She said she needs to wait for "clear and convincing data," but did not completely close the door to policy adjustments in June. For the May meeting, she explicitly ruled out the possibility of a rate cut: "The action now is too hasty

Summary: The Federal Reserve's "Dilemma"

The current Federal Reserve is facing a dual test: it needs to be vigilant against the inflation specter caused by tariffs and guard against the risk of economic slowdown. Officials choosing to 'brake with silence' is actually waiting for clearer signals. As Waller said, "The biggest challenge now is how to distinguish between 'temporary fluctuations' and' real trends' in data chaos." The tug of war between tariffs and policies may not be clear until the second half of the year.

Due to the lack of recent interest rate cut signals from the Federal Reserve, market expectations for aggressive easing have weakened, and the US dollar may receive support in the short term. However, the US dollar seems to lack strong upward momentum. Analysts point out that if economic data (such as employment and inflation) do not significantly deteriorate, the US dollar may maintain range volatility and be difficult to strengthen significantly.