The Federal Reserve (FED) is in a dilemma: lowering interest rates too early may trigger inflation again, while delaying rate cuts could lead to an economic recession.

On June 19, Nick Timiraos, a reporter for the Wall Street Journal known as the “mouthpiece of the Federal Reserve,” stated that the current purpose of the Federal Reserve in setting interest rates is not to help manage federal borrowing expenditures, but to maintain low and stable inflation in a strong labor market. The Federal Reserve is holding steady because it sees risks no matter what measures it takes. After four consecutive years of inflation above the target level, the inflation rate is close to the Federal Reserve’s 2% target, but has not yet fully reached it.

Cutting interest rates too early could trigger inflation again from The Federal Reserve (FED). Many economists expect that due to rising import costs, businesses will raise prices, and lowering interest rates may stimulate more economic activity at the wrong time. The Federal Reserve (FED) does not want to see a situation where, a year later, the inflation rate jumps back above 3% and remains at that level.

Long wait times, economic uncertainty, and rising costs due to tariffs may squeeze company profits, leading to layoffs and economic recession. The real estate market has recently slowed down, indicating that rising borrowing costs remain a significant hurdle in interest rate-sensitive sectors of the economy.

The Federal Reserve (FED) has more reasons to keep the Intrerest Rate unchanged, as the conflict in the Middle East could reverse the recent decline in energy prices. This uncertainty alone reinforces the case for caution, as it layers one supply shock on top of another driven by tariffs.