Hard data is stable, but market sentiment is "warning" U.S. Federal Reserve officials once again emphasize that they are not in a hurry to act.

Facing threats of tariffs, turmoil in the bond market, and significant volatility in the stock market, the Federal Reserve is trying to clear the way forward. In the eyes of the data-driven Federal Reserve, the current situation is particularly tricky. The information conveyed by hard data is that the unemployment rate remains low and inflation has eased somewhat. However, market sentiment is sending a much stronger warning signal: if tariffs are implemented, the economy may suffer greatly, and inflation may actually soar, potentially leading to a shadow of stagflation. On Thursday, Chicago Fed President Evans said at a roundtable luncheon at the New York Economic Club: "I usually rely more on hard data, which is the legal mandate given to the Federal Reserve: to stabilize prices and achieve maximum employment." However, he has changed his view somewhat: "In the current environment, I pay more attention to soft data." Soft data refers to real-time feedback from business owners about investment, employment, and pricing strategies. "For example, if tariffs take effect, how much cost will you pass on to consumers? How fast?" He said these questions have become more critical than ever. He pointed out that there is a noticeable increase in anxiety in market sentiment, with many worrying that we may return to the environment of uncontrolled inflation in 2021 or 2022, where cost issues are overwhelming. Evans said, "Now is not the time to act." The Federal Reserve currently prefers to observe rather than immediately adjust policy. The inflation data released on Thursday may provide some support for this wait-and-see stance, with the core Consumer Price Index rising only 0.06% month-on-month, well below expectations. This "below expectations" performance provides the Federal Reserve with more space to "wait and see." Although the data is temporarily comforting, some economists still warn that this "soft landing" state may be difficult to maintain. "Tariffs are likely to trigger a new round of inflation spikes," said Seema Shah, Chief Global Strategist at Principal Asset Management. "Even though tariffs on other countries were announced to be extended by 90 days yesterday, the risk of inflation remains high, and the Federal Reserve has no room for complacency." Some Federal Reserve officials also agree with this view. Kansas City Fed President George Schmid says that tariff announcements "increase economic uncertainty, while also raising the risk of upward pressure on inflation and bringing greater downside risks to employment and economic growth prospects." Boston Fed President Colin also predicts that the core Personal Consumption Expenditures Index could be "well above 3%" this year due to the supply chain impact of tariffs. Dallas Fed President Lagarde also warned that "if inflation continues to rise rapidly, households and businesses will expect prices to continue to rise, thus forming a self-reinforcing cycle of inflation." Despite rising unease, several officials have said that current policy is "relatively appropriate" and does not need to be adjusted immediately. Evans, Colin, and Lagarde have all expressed this stance. At the Federal Open Market Committee meeting on March 19-20, the Federal Reserve maintained its target range for the federal funds rate at 4.25%-4.50% and hinted at the possibility of three rate cuts (25 basis points each) throughout the year.