The Fed’s tariff tango: Stuck between a data rock and a Trump hard place

Jerome Powell walked out of the presser like a man who’d just defused a bomb—only to realize he might be sitting on another. Confidence in tone, but under the hood? Uncertainty was doing donuts in the lot. Welcome to the tariff economy, where nobody—not even the Fed—knows where the next macro body blow is coming from.

The game plan? Sit tight. Talk smoothly. Pray the tariff fallout doesn’t land like a sledgehammer.

The Fed’s June message was clear in its ambiguity. Inflation’s come off the boil, but the "Liberation Day" tariffs are now ticking under the surface like a delayed fuse. Powell admits it: “We haven’t been through a situation like this.” Translation? We’re flying blind. And that’s not the kind of thing you want to hear from the most powerful central banker on Earth.

The dots? All over the place. Ten officials want two cuts. Seven say “no cuts at all.” That’s a Fed split wide open—hawkish hesitation meets dovish paranoia. Powell's playing traffic cop between factions while tariffs throw nails across the road. The base case is still “data-dependent,” but let’s be honest—if tariff inflation hits while jobs roll over, this turns into a central bank cage match real fast.

Meanwhile, Trump’s out there screaming for 4 to 10 cuts like he's bidding in a QE auction. “We have a stupid person, frankly, at the Fed,” he says. Classy. But Powell doesn’t flinch. He sticks to the script: wait, watch, and keep monetary policy out of the West Wing’s Twitter feed.

Markets? They're pricing in a September cut, maybe. But Powell’s not giving anyone a lifeline just yet. The labor market’s not falling apart—just fraying at the edges. Inflation’s tame—for now. But this tariff shock could be either a one-off pop or a slow burn. Powell’s not committing to anything until the smoke clears.

And here's the real kicker: nobody knows who eats the tariff cost. Manufacturer? Importer? Retailer? Consumer? Powell admits the whole supply chain is playing a high-stakes game of hot potato. But someone’s going to catch it—and when they do, it’s going to show up in margins, demand, or both.

In other words: the Fed’s not steering this. They’re reacting. The problem is that the economy’s drifting into uncharted territory, and monetary policy is lagging the tape.

Powell wants to look like he’s in control. But for traders, the message is clear: the Fed’s still long “uncertainty,” short “conviction,” and boxed in between political pressure and inflation trauma.

Call it a balancing act. Call it a bluff. Either way, we’ll find out this summer if Powell’s holding aces—or just a pair of twos in a rigged tariff game.