Federal Reserve officials are navigating a complex policy environment as fresh U.S. tariffs inject uncertainty into growth and inflation projections. Recent business surveys paint a mixed picture output softening, while costs remain elevated raising the stakes on upcoming rate decisions.
Business sentiment shows caution
Recent CEO and CFO surveys point to weakening demand, with expectations for revenue growth falling compared to last quarter. At the same time, many firms continue to report elevated input costs, suggesting inflation remains sticky despite slowing activity.
Tariffs cloud corporate investment
With $82 billion in new import tariffs on multiple countries looming, businesses are delaying spending and reconfiguring supply chains. The move has introduced a new layer of risk to near-term growth forecasts.
Policy divergence complicates the Fed’s task
Inside the Fed, some officials push for a rate cut to support growth, while others argue inflation risks remain too high. Money markets currently price roughly a 60% chance of a September cut, though recent data keeps officials cautious.
Finding the right balance will require clear evidence that growth is slowing without igniting price pressures. The Fed enters its next meeting facing a delicate balancing act between economic support and inflation control.
