On March 20, Nick Timiraos, a reporter for The Wall Street Journal known as the "Fed whisperer," stated that the Federal Reserve's economic forecasts show (although their interest rate projections have not yet reflected it) that the economic outlook has undergone a significant change in just three months, and the threshold for rate cuts has been raised.

Officials have not only raised their core PCE inflation forecast for the second consecutive time (from 2.2% at the end of 2025 in September to 2.5% in December and then to 2.8% in March), but some officials have also slightly raised their forecasts for 2026 and even 2027. Furthermore, 18 out of 19 officials believe that the inflation risk is tilted to the upside. The labor market may need to weaken in order to facilitate rate cuts.

Powell hinted that the changes in inflation forecasts are almost entirely attributable to adjustments in trade policy. ("We are now facing inflationary pressures from external factors.") He had conversations with two former Federal Reserve officials who served during the 2019 trade tensions and the 2021 pandemic period of inflation, and they believe that the price resetting caused by tariffs will make it difficult for them to ignore the inflation issue.

"Basically, they're saying we have a potential inflation problem here. We're going to focus on that, and when we get more evidence on the growth side, we'll be willing to react at that point - not before. No one wants to act that way. But in this environment, that may be the approach they have to take."