Fed shifts approach due to inflation from trade war

The Federal Reserve is changing its strategy on interest rates. Recently, concerns about a trade war have pushed the Fed to reconsider its cautious approach, known as “wait and see.” This change comes as rising prices threaten the economy. The Fed usually cuts interest rates in two scenarios. One is when inflation decreases, which happened last year. The other is during economic downturns. Currently, the case for cutting rates due to lower inflation is weakening because of new inflation risks linked to trade tariffs. Tariffs can hurt the economy by reducing the supply of goods and services, leading to higher prices and slower growth. As a result, the Fed is becoming less likely to make cuts based on positive economic news. On March 19, 2025, the Fed is expected to keep interest rates the same, signaling that it is taking a cautious stance amid these economic challenges.