The Fed faces two potential economic crises. It can prioritize just one

President Donald Trump’s sweeping economic agenda is putting the Federal Reserve in a difficult situation it hasn’t confronted in decades. The topic is front and center for central bank officials as they convene for their two-day policy meeting this week.

President Donald Trump’s sweeping economic agenda is putting the Federal Reserve in a difficult situation it hasn’t confronted in decades. The topic is front and center for central bank officials as they convene for their two-day policy meeting this week. Trump has plunged the United States into an erratic trade war that threatens higher inflation and rising unemployment. The Fed may now have to choose between saving jobs or fighting inflation. If it lowers rates to guard against an economic downturn from Trump’s tariffs, that could potentially push up inflation. Yet if it raises rates to discourage a potential surge in inflation from Trump’s trade agenda, that could trigger an increase in joblessness. However, the most likely scenario is that the Fed will announce Wednesday that it is holding its benchmark lending rate steady at a range of 4.25% to 4.5%, extending a pause that began in January. “The Fed is caught in this wait-and-see approach, and the next round of data should swing them one way or the other, whether it’s to cut rates and support the economy or stay on hold to guard against additional inflation,” Dominic Pappalardo, chief multi-asset strategist at Morningstar Wealth, told CNN. “Once we get to early June, the economic data should give much greater insight on the impact of tariffs,” he said. For his part, Trump has accused the Fed of being behind the curve, ratcheting up pressure on the central bank in recent weeks to lower borrowing costs and attacking Chair Jerome Powell.