Economic Uncertainty and Risks
The latest minutes from the Federal Reserve (FOMC) and statements from Fed Chair Jerome Powell reflect an increased uncertainty regarding the economic outlook in the USA. This uncertainty largely arises from the potential impacts of new tariffs, the details of which remain unclear.
The Fed recognizes an increased risk of both higher unemployment and rising inflation. It sees a difficult balance: an overly early easing of monetary policy could exacerbate inflation, while waiting too long could have negative effects on the labor market and growth.
Current Economic Situation
The labor market appears robust with low unemployment near its maximum. Inflation has decreased but remains slightly above the target rate of 2 percent. GDP growth has slowed down, influenced by fluctuations in net exports, while private consumer spending and investment are growing moderately.
Monetary Policy Decisions
In May 2025, the key interest rate was left unchanged. The Fed signals patience but wants to wait for future economic data before taking further steps. While current stability prevails, future interest rate cuts are not excluded, particularly in the event of negative developments in the labor market.
Potential Market Impacts
The increased uncertainty could lead to greater volatility in the financial markets. Changes in monetary policy or new tariff information could affect both equity and cryptocurrency markets. US companies are considering passing on costs to consumers due to new tariffs, which could create further inflationary pressure.
Overall, the Federal Reserve faces the challenge of weighing inflation risks against a deteriorating labor market. The current strategy is characterized by patience and waiting for additional data.
“The risks of higher unemployment and higher inflation appear to have risen… the current stance of monetary policy leaves us well-positioned to respond in a timely way to potential economic developments.” — Jerome Powell (Press Conference May 7th)
This cautious stance highlights the Fed’s commitment to respond flexibly to uncertain economic conditions.