Federal Reserve Has No Alternative to ‘Wait and See’

The phrase “heightened uncertainty” hardly does justice to the US economy’s current condition, to say nothing of the Federal Reserve’s policy predicament. War in the Middle East could drive oil prices sharply higher. Tariffs already in place and the prospect of more to come will raise costs for consumers and producers, threatening a toxic combination of higher inflation and rising unemployment. What’s a central bank to do?

Not helping matters, the White House has been making its own view all too clear: Cut interest rates immediately. The Fed dared to disagree at its meeting on June 18, leaving the policy rate unchanged at 4.25% to 4.5%, while signaling (as before) two quarter-point cuts to come later this year. Answering questions in Congress on Tuesday, Chair Jerome Powell met further pushback. But on balance, this “wait and see” judgment looks right.