Jerome Powell won’t be in a hurry to deliver further interest rate cuts and intends to remain on the sidelines until policy changes under Trump administration, Goldman Sachs chief economist says

• The Federal Reserve, led by Chairman Jerome Powell, is expected to remain on the sidelines amid economic uncertainty and inflation concerns despite markets formerly expecting rate cuts. Trump's tariff policies have added to volatility, making the Fed more data-dependent. Analysts predict two rate cuts in 2025 but caution that the Fed will wait for clear economic deterioration before making any moves.

Even before taking office, Donald Trump sought to bring the Federal Reserve’s decisions into the court of public opinion. But while Fed officials insist they are accountable to the public, chairman Jerome Powell has avoided direct clashes with the White House.

Now, with Trump’s tariff policies fueling market volatility, Wall Street expects the Fed to stay on the sidelines, with no rate move following this week’s FOMC meeting. Analysts had anticipated a series of “normalization” cuts to spur economic growth, but the administration’s potentially inflationary tariffs on key trading partners—including China, Mexico, and Canada—have pushed those expectations back.

As David Mericle, chief U.S. economist at Goldman Sachs, put it in a note seen by Fortune this week: "At its March meeting this week, the FOMC will likely reiterate that it is not in a hurry to deliver further interest rate cuts and intends to remain on the sidelines until policy changes under the new administration become less volatile and uncertain and the outlook becomes clearer.

"Both elevated policy uncertainty and the likelihood of higher tariffs and higher inflation this year mean that the normalization cuts that FOMC participants penciled into the dot plot at the end of last year now look further off. But we suspect that the Fed leadership would nevertheless prefer for the median 2025 dot to continue to show two cuts this year to avoid adding to recent market turbulence, even if this might be somewhat awkward to explain as a modal forecast."

As a result, Goldman now expects two cuts in 2025 to 3.875%, two cuts in 2026 to 3.375%, and one cut in 2027 to 3.125%. Correspondingly, Mericle revised his median core PCE inflation expectation upwards by 0.3pp to 2.8% for 2025, and downgraded GDP by 0.3pp to 1.8%.

“The Federal Reserve will remain firmly planted on the sidelines at this week’s meeting. Stubborn inflation and recent economic uncertainty will make them ever more data-dependent in the coming weeks and months,” echoed Bankrate's chief financial analyst, Greg McBride.

McBride also explained why the Street has shifted its stance from pining for cuts, as it was lost year: “While the idea of interest rates coming down is appealing to many consumers and businesses, the reason for lower interest rates is very important. We want interest rates to decline because inflation declines, not because of economic weakness.

"The recent drop in mortgage rates was fueled by concerns of economic weakness, so be careful what you wish for.”

Tariffs were already on Powell's radar

Despite President Trump insisting he wanted to see lower interest rates—even going so far as to threaten to fire Powell if he didn't comply—the Republican politician has gone on to announce policies that have had precisely the opposite effect.

The FOMC, which meets eight times this year, had already flagged in January that it was concerned about Trump's tariff rhetoric, which could ultimately raise prices for consumers.

And their fears have had reason to increase since then: In February, the FOMC didn't meet, and by March, a further host of tariffs had either come into effect or been threatened.

With April 2 around the corner—a date many on Wall Street have pencilled in as D-Day for a universal tariff announcement—the risks the FOMC has previously highlighted are likely to have increased in brevity.

With uncertainty on the rise and consumer inflation expectations also growing, Professor Jeremy Siegel added that despite bait from Trump, Powell is likely to keep his cards close to his chest.

"The upcoming Fed meeting this week will be another key moment for markets," Professor Siegel wrote in his weekly commentary for WisdomTree, where he is a senior economist. "No rate change is expected, but we will get the updated dot plot. The market is pricing in two rate cuts this year, but I am not convinced that the Fed will fully signal that just yet.

"So far, the real economic data—outside of sentiment surveys—has not shown significant weakness. Jobless claims remain steady, and as noted, a bit of bounce in retail sales in February. Powell very well may take the position that 'we will wait to see real economic deterioration before moving,' this could come across as hawkish, especially given the growing fears around tariffs and inflation."

Professor Siegel noted Powell will face "tough questions" over sentiment and inflation fears, adding: "His response should be closely scrutinized.

"The Fed’s independence from the White House remains critical, and Powell has signaled that he will not be bullied by Trump or pressured into premature moves. If unemployment starts rising, the Fed will act—but they will likely wait for hard data before committing to cuts."

This story was originally featured on Fortune.com