The Federal Reserve, trapped in Trump's policies

The recent Federal Reserve seems to be caught in an awkward dilemma. On one hand, Federal Reserve officials frequently state that monetary policy is in a "good position" to address various upside or downside risks; on the other hand, in the face of the volatility brought about by the Trump administration's aggressive trade and economic agenda, as well as other factors that may affect policy, the Federal Reserve has to maintain a cautious and neutral stance. Atlanta Fed President Raphael Bostic pointed out in a blog post last week: "In recent weeks, there has been not only enthusiasm for possible changes in tax and regulatory policies but also a general sense of concern about future trade and immigration policies... These headwinds add more complexity to policymaking." "Uncertainty" has also become an increasingly common theme. In the minutes of the Federal Reserve's January meeting, the mention of the "uncertain economic environment" occurred as many as 12 times, specifically highlighting the "high uncertainty regarding the range, timing, and potential economic impacts of changes in trade, immigration, fiscal, and regulatory policies." Analysts have pointed out that this uncertainty is primarily reflected in employment and inflation, which are precisely the core considerations for Federal Reserve decision-making. Among these, the inflation issue is particularly concerning. Inflation has been declining, but due to concerns from consumers and business leaders that tariffs may affect prices, inflation could rise again. Notably, the Federal Reserve's 2% inflation target has not been achieved for nearly four years. St. Louis Fed President Alberto Musalem stated that he believes the risk of inflation remaining above target is skewed to the upside. Chicago Fed President Austan Goolsbee, however, is more cautious, noting that the impact of tariffs depends on the applicable countries' scope and scale, "the more it resembles the scale of the COVID-19 pandemic shock, the more you should be worried." In addition to inflation, financial stability is also a closely monitored issue by the Federal Reserve. The January meeting minutes described the risks to financial stability as "significant," particularly regarding bank leverage and long-term debt holdings. Noted economist Mark Zandi warned that the $46.2 trillion U.S. bond market could face significant risks, stating: "The bond market is extremely fragile... primary dealers cannot keep up with the amount of outstanding debt. I believe there is a very significant threat that at some point in the next 12 months, there could be a massive sell-off in the bond market." In this complex environment, the Federal Reserve seems to have no choice but to maintain a neutral stance, waiting for more certainty to emerge. Although the market expects a 50 basis point rate cut by the end of the year, considering tariffs and other uncertainties, this expectation may still be overly optimistic. Zandi stated that the Federal Reserve will not cut rates unless there is a better sense of inflation returning to target, and many storms are yet to come. Risk Warning and Disclaimer Markets are risky, and investments should be made cautiously. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances Invest based on this, and you bear the responsibility