Good morning. C-suite leaders have plenty to worry about, with economic uncertainty high on the list—and Federal Reserve Chair Jerome Powell shares their concerns.
“It’s not an easy job, but it’s one we’ve willingly taken on,” Powell said Tuesday during a House Financial Services Committee hearing, referring to the role of the Fed. He reflected on how much people rely on the central bank to get things right.
As chair, Powell said he worries about whether there will be a healthy economy for his successor to inherit. “All I want to do in what’s left of my time at the Fed is have the economy be strong, have inflation under control, and have a solid labor market,” he said. “I want to turn it over to my successor in that condition … What keeps me up at night is to do that. That’s the only thing I think about.”
Powell’s term ends in May 2026, but speculation about his successor is already underway, especially as President Donald Trump has repeatedly criticized him for not lowering interest rates.
So far in 2025, the Federal Open Market Committee has kept rates steady at 4.25%–4.5%, adopting a wait-and-see approach as it monitors the effects of tariffs and other changes on inflation. “All professional forecasters that I know of, on the outside and the Fed, do expect a meaningful increase in inflation over the course of this year,” Powell said on Tuesday. He also mentioned that smaller businesses relying on single imports are especially vulnerable to tariffs, while larger firms can better absorb such shocks.
Commenting on Powell’s testimony, EY-Parthenon Chief Economist Gregory Daco told me he found it important that Powell stressed that, absent tariffs, the Fed would likely have continued easing policy—confirming an underlying desire to move from a restrictive stance to a neutral one.
Daco’s Global Economic Outlook report released Monday highlights that the Fed faces a narrow path: growth is slowing, but new inflationary pressures from tariffs and fiscal policy complicate further rate cuts. “The risk of holding rates too high for too long is rising,” he writes.The primary risk is the Fed maintaining a restrictive stance even as the economy weakens, Daco told me. Headline inflation may rise soon due to tariffs, but these are supply-side shocks—not signs of overheating demand, he explained. Higher prices likely will reduce demand as job growth slows, impacting investment and spending. Delaying rate cuts risks worsening economic and labor market pressures.
His advice for CFOs: “This environment calls for a strategic balancing act: maintain strong liquidity buffers, rigorously stress test downside scenarios under tighter financial conditions, and remain agile in adjusting investment plans should labor costs ease and demand growth decelerate.”
Sheryl [email protected]
This story was originally featured on Fortune.com
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