US economy under fire? Why US Fed's Powell used words “wait”, “uncertain” atleast 25 times last night

Vijay Valecha, Gulf News, May 8, 2025

Dubai: The US Federal Reserve may have kept interest rates unchanged at 4.2%–4.5%, but Chair Jerome Powell’s press conference made one thing clear: the Fed isn’t in a rush to move. Instead, Powell leaned heavily on words like “wait” and “uncertain,” repeating them roughly 20 to 25 times—a clear signal of the central bank’s cautious, data-driven stance in the face of mounting global pressures.

US in 'wait-and-see' mode

“We are well-positioned to wait for greater clarity before considering any adjustments to our policy stance,” Powell said, underscoring what’s now become the Fed’s key approach. That “wait-and-see” message reflected the central bank’s concern over unresolved issues like the impact of trade tariffs, inflation trends, and labor market resilience. The Fed has held rates steady since its last cut in December 2024, opting to watch how the economy evolves before making any further moves.

Powell also emphasized the growing difficulty of making the right call in such an uncertain environment. “There’s so much uncertainty,” he said, especially as tariff talks between the US and China continue without a clear outcome. The potential for tariffs to stoke inflation while slowing growth makes the Fed’s job more complicated—raising the risk of stagflation, a scenario where inflation and unemployment rise while growth stalls.

Why the Fed hit pause

Vijay Valecha, Chief Investment Officer at Century Financial, explained the rationale behind the Fed’s decision: “The rationale behind this (wait-and-see approach) move is that the U.S. economy remains on a solid footing, as evident from the persistent strength in hard economic data. As a result, the Fed is well positioned to wait and monitor forthcoming economic data points before deciding its next move. Another factor that influenced the Fed’s decision is the potential inflationary impact of Trump’s tariffs. The word ‘uncertainty’ was bandied about several times by Powell, especially pertaining to the scope and magnitude of tariffs… Persistent price pressures of a considerable magnitude could cause inflation to become entrenched... This has elevated the possibility of stagflation, making the Fed’s path forward even more uncertain.”

What it means for the UAE

With the dirham pegged to the US dollar, the UAE Central Bank’s decision to mirror the Fed’s rate hold means borrowers here may not see immediate relief. However, the UAE’s strong non-oil sector performance continues to act as a buffer. As Valecha adds, “The UAE is well-positioned to function as a safe haven in the prevailing macroeconomic climate.”

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