"Fed Whisperer": The Federal Reserve has decided to hold steady because any action it takes carries risks.

BlockBeats News, June 19, Nick Timiraos, a reporter for The Wall Street Journal often referred to as the "Fed whisperer," stated that the Federal Reserve's rate-setting goals are not aimed at managing federal borrowing costs, but rather at maintaining low and stable inflation within a robust labor market. The Fed's decision to hold rates steady is driven by the risks it perceives in any course of action. After four consecutive years of inflation above its target level, the inflation rate is now nearing the Fed's 2% target, though it has not fully achieved it.

Cutting rates too soon could reignite inflation. Many economists predict that rising import costs will prompt companies to raise prices and that rate cuts could stimulate excessive economic activity at the wrong time. The Fed is keen to avoid a scenario where inflation climbs back above 3% within a year and remains elevated.

On the other hand, waiting too long carries its own risks. Economic uncertainty, coupled with tariff-induced cost increases, could squeeze corporate profits, leading to layoffs and a potential recession. The recent cooling of the real estate market highlights how rising borrowing costs are continuing to act as a major headwind for rate-sensitive sectors of the economy.

The Fed has additional reasons to keep rates unchanged, including the ongoing Middle East conflict that could reverse the recent decline in energy prices. This uncertainty alone strengthens the case for caution, as it adds a supply shock on top of another shock driven by tariffs.