Officials at the Federal Reserve have adopted a wait-and-see approach to policy moves amid extreme uncertainty about the economic outlook.
Ahead of the Federal Reserve’s meeting this month, investors were still holding out hope that the central bank would soon restart the interest rate cuts that it put on pause in January. But minutes from that gathering underscore how wedded officials were to their wait-and-see approach amid extreme uncertainty about the economic outlook.
A record of the Fed’s May 6-7 meeting, released on Wednesday, highlighted the overwhelming support among officials to hold off on cutting rates until they had more clarity about President Trump’s policies and how the economy was responding to whipsawing tariffs, tax cuts, immigration restrictions and other cornerstones of his administration’s agenda.
“Participants agreed that with economic growth and the labor market still solid and current monetary policy moderately restrictive, the Committee was well positioned to wait for more clarity on the outlooks for inflation and economic activity,” the minutes said.
Uncertainty about the outlook had become “unusually elevated,” officials said, “making it appropriate to take a cautious approach until the net economic effects of the array of changes to government policies become clearer.”
The meeting took place just before some of the most aggressive tariffs against China were temporarily rolled back, a move that helped to ease fears that Americans would soon face shortages and that the economy was headed for a much more substantial downturn. Even as Mr. Trump has announced trade agreements with some countries, he has ratcheted up tensions with others, including threatening 50 percent tariffs on imports from the European Union last week before delaying them days later.
Officials concluded at the May meeting that the tariff increases at that point had been “significantly larger and broader than they had anticipated,” the minutes said.