Markets Shake Off Tariff Fears, But Fed Says There’s No Swift Fix For Woes

The S&P 500 and Nasdaq hit record highs this week after monthly inflation data signaled that sweeping tariffs aren’t causing a major spike in consumer prices, boosting hopes the Federal Reserve may soon start cutting interest rates, George Glover reported for Barron’s Daily.

Powell said last month the Fed would probably have eased monetary policy already if not for tariffs, and the market could be in for a rude awakening if he reiterates that stance. (Photo: New York Stock Exchange Facebook)

The prevailing view is that July’s soft jobs report means the central bank will prioritize supporting the labor market by lowering borrowing costs, even if inflation runs slightly above target.

Treasury Secretary Scott Bessent has even called for a half-point cut — a sharp shift given that the Fed has yet to lower rates this year.

Still, both investors and the Trump administration know Fed Chair Jerome Powell may not be on the same page.

Powell said last month the Fed would probably have eased monetary policy already if not for tariffs, and the market could be in for a rude awakening if he reiterates that stance at next week’s Jackson Hole Economic Symposium.

It’s been anything but a smooth relationship between Trump and Powell. With markets now pricing in three straight rate cuts, the Fed chair would need to align with the president’s thinking to avoid a major stock market disappointment.