Jerome Powell’s Predicament
Author: Greg Valliere
March 17, 2025
GROWING SIGNS OF AN ECONOMIC SLOWDOWN — or, at the least, uncertainty — have put the Federal Reserve in an awkward spot. The struggling stock market needs some medicine, but Chairman Jerome Powell still worries about inflation and probably isn’t ready to move yet.
LAST FRIDAY’S TERRIBLE consumer confidence data provided more evidence that the economy is faltering. And the closely watched Atlanta Fed “GDP now” reports a forecast of a 2.1% first quarter decline.
IF THIS MORNING’S RETAIL SALES report shows another drop, that would send a signal to Fed officials who will be meeting in Washington on Tuesday and Wednesday. A rate cut probably will have to wait until the May 7 or June 18 FOMC meetings.
BUT SOME VERY DOVISH LANGUAGE is likely this week, especially if the retail sales report is weak today. If the retail sales report is exceptionally weak, a rate cut could be back on the table this week.
WE THINK Powell’s press conference on Wednesday will be important; he’s likely to cite economic uncertainty — especially tariff uncertainty — as a reason to wait on a rate cut, but we think he will indicate that one is coming this spring.
WHAT IF POWELL CITES persistent inflation and keeps his comments relatively hawkish? That could prompt an eruption from Donald Trump, who has taken advice from his economic advisers and refrained from bashing Powell.
BUT TRUMP won’t stay silent much longer — failure by the Fed to cut rates this week could provoke the president.
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