The Federal Reserve has made it clear: there will be no "preemptive rate cuts."

In the face of inflation risks brought about by Trump's tariff policy, Federal Reserve officials have clearly stated that they will prioritize combating inflation rather than preemptive rate cuts.

Currently, several Federal Reserve officials have released clear signals through public comments and interviews, ruling out preemptive rate cuts as an insurance policy against economic slowdown. To minimize the upward inflation risks caused by tariff policies, they may be prepared to keep the policy interest rate unchanged.

Analysts point out that Federal Reserve officials have doubled down on their commitment to controlling inflation and the inflation expectations of the American public, this stance is likely to keep them on hold unless the unemployment rate rises significantly.

Minneapolis Fed President Neel Kashkari wrote in an article released on Wednesday morning:

"Given the paramount importance of maintaining stable long-term inflation expectations and the possibility that tariffs could push up short-term inflation, the threshold for rate cuts is higher even in the face of a weakening economy and potential increases in unemployment. The barriers to changing the federal funds rate have increased due to tariffs."

According to federal funds futures data, as of this Wednesday, investors generally expect three rate cuts of 25 basis points each this year.

The Federal Reserve Maintains a Wait-and-See Approach, with Inflation Stability as the Primary Goal

The Federal Reserve's wait-and-see stance is primarily driven by inflation factors.

Reports indicate that the Federal Reserve aims to prevent any tariff-related inflation from evolving into a long-term trend. Previously, Powell stated that while tariffs are likely to trigger a temporary rise in inflation, their effects could also be more lasting.

Derek Tang, an economist at Washington's LH Meyer/Macroeconomic Policy Analysis, analyzed:

"Powell may be focusing on long-term goals: sustained price stability. He certainly does not want to provide a safety net for a recession that has not actually occurred yet."

Considering that "long-term inflation expectations have remained quite stable," Tang expects that the Federal Reserve will not cut rates this year:

"The question is how long this expectation can remain stable when price shocks occur."

Currently, officials have already seen some warning signals related to tariffs in economic data, such as a recent rise in goods inflation. However, most long-term expectation indicators remain well-anchored, and once these indicators begin to rise, it will make it more difficult for the Federal Reserve to control inflation.

The Federal Reserve's slow response to post-pandemic inflation surges may also put pressure on decision-makers. After making substantial progress in combating inflation, they are reluctant to make policy mistakes that could undermine their efforts.

Significant Deterioration in the Labor Market Could Lead the Federal Reserve to Change Its Stance

Current data shows that the U.S. labor market remains stable, further reinforcing officials' confidence that maintaining a wait-and-see approach is the right decision.

At least for now, officials have indicated that they are fully prepared to respond as the situation clarifies.

Powell stated on April 4:

"We need to wait and see how things develop before we can start making these adjustments."

Nomura Securities economist Jeremy Schwartz expects there may only be one rate cut this year, in December, and for the Federal Reserve to take more aggressive action, there may need to be large-scale layoffs, a significant rise in unemployment claims, and a notable increase in the unemployment rate. **

Schwartz stated:

"Not only is inflation too high now, but it has also been above target for years, and it will continue to develop in an unfavorable direction. In this context, lowering interest rates would jeopardize the Federal Reserve's credibility in achieving its inflation target."