Fed Mouthpiece: The Federal Reserve Holds Steady Because Every Move Carries Risks

According to ChainCatcher, Nick Timiraos, a Wall Street Journal reporter often referred to as the “Fed whisperer,” stated, “Currently, the Federal Reserve’s purpose in setting interest rates is not to help manage federal borrowing costs, but to maintain low and stable inflation within a robust labor market. The Fed is holding steady because it sees risks no matter what action it takes. After four consecutive years of inflation running above target, the inflation rate is now close to the Fed’s 2% goal, but has not fully reached it.

If the Fed cuts rates too soon, it could trigger another round of inflation. Many economists expect that, due to rising import costs, businesses will raise prices, and a rate cut could stimulate more economic activity at the wrong time. The Fed does not want to see a scenario where, a year from now, inflation jumps back above 3% and stays there.

If the Fed waits too long, economic uncertainty combined with higher costs from tariffs could squeeze corporate profits, leading to layoffs and a recession. The recent slowdown in the real estate market indicates that rising borrowing costs remain a significant drag on interest rate-sensitive sectors of the economy.

The Fed has additional reasons to keep rates unchanged, as conflicts in the Middle East could reverse the recent decline in energy prices. This uncertainty alone reinforces the case for caution, as it adds a supply shock on top of another shock driven by tariffs.”