--- title: "Fed Whisperer: Fed Expected to Hold Steady This Week; Key Divide: Signal That Rate Cuts Are Off the Table or Merely Delayed" type: "News" locale: "en" url: "https://longbridge.com/en/news/284451050.md" description: "Nick Timiraos writes that the historical mirror of 1970s stagflation is no longer as distant as it was two years ago. The Federal Reserve's April meeting marks a node in a deeper debate: How long can the Committee maintain its stance that \"the next move is more likely to be a rate cut than a hike\"? Should the wording of the official statement be revised to imply that rate cuts are largely off the table?" datetime: "2026-04-28T21:15:06.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/284451050.md) - [en](https://longbridge.com/en/news/284451050.md) - [zh-HK](https://longbridge.com/zh-HK/news/284451050.md) --- # Fed Whisperer: Fed Expected to Hold Steady This Week; Key Divide: Signal That Rate Cuts Are Off the Table or Merely Delayed Nick Timiraos, the prominent financial journalist known as the "Fed Whisperer," wrote ahead of the Federal Reserve's April FOMC meeting: > Two years ago, with the U.S. economy running smoothly and inflation continuing to fall, Federal Reserve Chair Powell humorously responded to external concerns about "stagflation": "To be honest, I see neither stagnation nor inflation." > > Today, an energy shock triggered by a real war has pushed this risk back into the spotlight—while inflation in the U.S. economy has never truly returned to the Federal Reserve's 2% target. **The historical mirror of 1970s stagflation is no longer as distant as it was two years ago.** Stagflation refers to the predicament where economic growth stagnates alongside high inflation. Last year, this topic resurfaced as tariff policy threats pushed up prices and suppressed employment. But at that time, it remained theoretical, with policy adjustments ready to correct course at any moment. Timiraos points out that it is almost certain that Federal Reserve officials will keep the benchmark interest rate unchanged in the 3.5% to 3.75% range at the two-day meeting ending this Wednesday. However, this meeting—also the last before Powell's term expires—marks a node in a deeper debate: **How long can the Committee maintain its stance that "the next move is more likely to be a rate cut than a hike"?** Federal Reserve officials are closely observing how the U.S. economy digests the fourth supply shock within five years: the post-pandemic reopening, the Russia-Ukraine conflict, the tariff turmoil, and the Iran war. Each shock could be interpreted as an isolated incident requiring no policy response. However, the cumulative effect has left officials walking on thin ice. Tariffs are already testing the tolerance limits of businesses and consumers for price hikes. Timiraos states in his article that **Federal Reserve policymakers are still grappling with a question: Does weak job growth overstate the fragility of the labor market?** If the economy no longer needs to add as many jobs as before due to slower immigration, then a decrease in new employment may not signal a true recession. Federal Reserve Governor Waller, who strongly supported three rate cuts last year citing concerns about the U.S. labor market, has now shifted his focus to guarding against inflation. Citing the history of the 1970s—when officials repeatedly viewed shocks as "transitory" and failed to respond, allowing inflation expectations to quietly become unanchored—Waller said: > We must remain alert to this series of isolated shocks; expectations are crucial. At some tipping point, you may have to act. > > We have always said the target is 2%. Five years have passed, and inflation has never truly returned to that level. When will people start questioning your commitment? Although a ceasefire has been declared in the Iran war, the Strait of Hormuz effectively remains blockaded. Aviation fuel prices have soared. Federal Reserve officials now expect that the process of returning inflation to the 2% target will stall for another full year. Some Federal Reserve officials had previously discussed resuming rate cuts this year to offset the effect of "automatic tightening as inflation falls while rates remain unchanged." This narrative is now a thing of the past. New York Fed President Williams stated earlier this month: > As things stand, that scenario simply does not exist. If anything, inflation is moving upward. > > Williams characterized the Federal Reserve's current stance as an active choice rather than passive adherence: Our monetary policy is clearly in the right place, which is exactly where we want to be. Timiraos points out that compared to the 1970s, the U.S. economy today has undergone profound changes, making a complete repetition of history unlikely. Moreover, the Federal Reserve today places far greater emphasis on managing inflation expectations than it did back then. For members of the Federal Reserve FOMC Committee, Timiraos indicates that **the bigger question is: Should the wording of the official statement be revised to imply that rate cuts are largely off the table? History shows that the impact of such linguistic adjustments can sometimes be no less significant than the rate decision itself.** Since the end of last year, the Federal Reserve's statement has retained a nine-character phrase implying that the next policy action is more likely to be a rate cut than a hike. In the last two meetings, a few officials have advocated deleting this wording—once deleted, it would mean that the possibilities of rate cuts and hikes are viewed as equally likely: > The rationale for those advocating deletion is: Inflation trends are moving in the opposite direction, and with shocks piling up, predicting when it will return to 2% is becoming increasingly difficult; the labor market remains robust, and stock prices have rebounded to historic highs. All of this is inconsistent with the image of a Committee still implying that rate cuts are on the horizon. > > However, the mainstream view within the Committee is that this change is somewhat extreme. Formally revising the wording itself would tighten financial conditions, constituting a hawkish move that officials may not yet be ready to take. Powell ally Williams stated, "It is not appropriate for us to issue strong forward guidance at this time, and indeed we have not done so." > > Federal Reserve officials will revisit this issue again this week. Timiraos stated that the thinking of the Federal Reserve FOMC Committee sometimes moves faster than its language. Before wielding the "heavy hammer" of formal statement wording, officials have other, more indirect ways to convey policy direction—whether through Powell's press conference on Wednesday, officials' speeches in May, or the economic projections released at the next meeting in mid-June. Timiraos concluded that by then, the helm of the Federal Reserve FOMC Committee will likely have passed to Kevin Warsh—the former Federal Reserve Governor nominated by Trump, succeeding Powell. 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