Federal Reserve Chairman Jerome Powell: Maintaining interest rates unchanged is the best choice before Trump's policy becomes clear.

Cleveland Fed President Mester said that officials have sufficient reasons to keep interest rates at their current level until the impact of tariffs and other policy changes on the economy becomes clearer. Mester believes that there are risks of rising inflation and declining job growth in the near and medium term, which will pose difficult trade-offs for policymakers. She pointed out that in such situations, it is crucial for officials to maintain consumer expectations of inflation stability. "Given the pressures on both our dual mandate, there are sufficient reasons to maintain monetary policy stability to balance the risks of further rising inflation and slowing labor market," Mester said in a speech prepared for an event in Columbus, Ohio on Wednesday. "When the situation is unclear, waiting for more data will help guide future actions." Several Fed officials have hinted that they may keep rates unchanged until President Trump's final plans on trade, immigration, and regulation become clear. Policymakers and economists have lowered their expectations for economic growth this year and raised their expectations for inflation due to Trump's tariff measures and the uncertainty they bring. Mester said last week that officials are making "prudent choices" to maintain rate stability until they have a better understanding of economic trends. Officials will hold their next meeting on May 6th to 7th. The Cleveland Fed President reiterated on Wednesday that current rates are in a "modestly restrictive" state. She stated that this stance is appropriate for lowering inflation, which is still above the Fed's 2% target. Mester pointed out that in recent weeks, financial conditions have tightened with stock market declines, widening credit spreads, and rising long-term rates. Future directions Based on the economic situation, Mester outlined different policy possibilities. She said that in an economic recession with decreasing inflation, lowering interest rates could be reasonable, "possibly even necessitating a rate cut quickly." However, she stated that if the labor market remains strong and inflation continues to rise, interest rates may need to move onto a "more restrictive path." The third possibility is "high inflation with a slowing labor market coexisting," which will pose "some challenging trade-offs" for policymakers. "In that scenario, it will be very important to ensure that inflation expectations remain stable while evaluating the potential magnitude and persistence of deviations from our dual mandate goals," Mester said.