The Wall Street Journal: International situation and employment data put the Federal Reserve in a dilemma, and it may remain on the sidelines in the short term

Gate News reports that on March 8, Wall Street Journal reporter Nick Timiraos (known as the “Fed’s mouthpiece”) wrote an analysis stating that the employment report released on Friday has further intensified the Fed’s dilemma between fighting inflation and protecting jobs.

Timiraos quoted Minneapolis Fed President Neel Kashkari’s warning, indicating that the current international situation may be becoming a “replay” of the Russia-Ukraine conflict, and reminded the Fed not to repeat the mistake made in 2021 when it deemed inflation as temporary. Kashkari has voting rights in this year’s FOMC meetings.

Regarding the Fed’s next policy move, Timiraos predicts that officials may currently choose to wait and see. He pointed out that Fed Chair Powell had urged rate cuts three times at the end of last year, but each time sparked increasing controversy within the 12-member FOMC rate decision committee. Officials have made it clear that they are not in a rush to adjust rates at this month’s later meeting, and even worrying data from the past month is unlikely to change this stance.

Further analysis by Timiraos suggests that if unemployment continues to rise in the coming months, the Fed might restart rate cuts by mid-year; however, if inflation data rises again before then, internal resistance will significantly increase. He summarized that a central bank facing both weakening employment and reignited inflation risks “has almost no good options.”