How will the Fed manage Trump's economy?

President Donald Trump has long been jealous of the Federal Reserve's power over the American economy. With stocks falling and tariffs rising under Trump's watch, however, the world's financial experts (and a whole bunch of folks on Wall Street) are looking to see how the Fed responds to sudden instability.

Federal Reserve Chair Jerome Powell plans to "remain cautious" about making any big policy changes, at least for now, said The Washington Post. The Fed does "not need to be in a hurry" to respond to the president's flurry of actions that have heightened uncertainty in the markets, Powell said Friday. Instead, "we are focused on separating the signal from the noise as the outlook evolves." The Fed is "well positioned" to handle the "risks and uncertainties" of the new economy, he added.

Trump's tariffs have put Powell "in a bind," said Politico. The trade fees are "likely to slow the economy," which would usually prompt the Fed to lower interest rates. But they could also spark a new round of inflation, which would normally push rates upward. The uncertainty is why Powell and the Federal Reserve are waiting to see whether "slow growth or spiking prices" poses a "bigger long-term risk to the economy," said the outlet.

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What did the commentators say?

Trump "may have found a way to force the Federal Reserve to lower interest rates," said Nir Kaissar at Bloomberg. It is no secret that the president "wants more say in monetary policy" and that he wants interest rates lowered. Powell and the Fed have so far managed to defend their independence. But Trump "may have a back door" to push the central bank in his desired direction, Kaissar said: If Trump's actions coincide with an economic slowdown, the Fed "will likely act."

Central banks like the Fed have "long been the lead policy actors in world markets and economies," said Mike Dolan at Reuters. But they may be stepping back as "governments grab the limelight." Trump has forced a "dramatic re-casting of the global economic script" with his trade wars, unnerving businesses and consumers. The uncertainty means the Fed "can barely make an accurate forecast for what's going to happen next week," much less plan for the longer term. It is a "good bet the Fed will sit on its hands for a while longer" before taking action.

What next?

"Don't expect Trump or Powell to bail out investors" as the stock market continues to slide, said MarketWatch. A "lack of progress" in slowing inflation has "effectively tied the Fed's hands" when it comes to lowering rates. Many investors believe that the "administration still has a pain threshold" for how far it will allow stocks to fall before it reverses course. That hasn't proven true so far. "I'm not sure what kind of decline will get them to move," said George Cipolloni at Penn Mutual Asset Management.