Part 5/11:
The Federal Reserve finds itself at a crossroads. On one side, raising interest rates to combat inflation risks further slowing economic activity, potentially leading to a spike in unemployment. On the other, cutting rates prematurely could reignite inflation, especially if tariff and trade policies remain conducive to rising prices.
Given the current conditions—rising inflation amid declining GDP—the Fed is likely to prioritize inflation control, but this could deepen economic stagnation. The ongoing political tension, particularly the bickering between President Trump and Fed Chair Jerome Powell, adds another layer of complexity, possibly undermining the independence of monetary policy.