Fed, RBA Face Inflation and Policy Uncertainty

U.S. Federal Reserve officials expressed concerns in May 2025 about the risk of rising inflation coinciding with higher unemployment, driven by uncertainty surrounding President Trump's proposed tariffs. The Fed minutes showed that nearly all policymakers saw persistent inflation as a threat, potentially forcing tough decisions between tightening policy or supporting growth. Although the most aggressive tariffs were later postponed, the initial announcement increased recession risks and market volatility, prompting a cautious Fed approach. In Australia, inflation held steady at 2.4% in April, slightly above expectations but within the central bank’s 2–3% target. This has allowed the Reserve Bank of Australia to consider further interest rate cuts, with markets anticipating possible easing as soon as July. Both central banks face challenges from unpredictable trade policies and volatile economic signals.