Federal Reserve officials are trying to assess how tariff increases will reshape the outlook for the U.S. economy and inflation.

With the caveat that this is a low-probability event, we discuss what the implications of an early departure of Powell would mean for Treasuries and the dollar. We assume that an early departure of Powell would be followed quickly by a replacement super-dove as head of the Federal Reserve.

The Fed stated earlier that uncertainty around the economic outlook had increased. Another factor that will be closely watched is the dot-plot rate projections.

Apollo, for one, expects just one rate cut in 2025. JPMorgan strategists forecast two. Goldman Sachs last week updated its prediction to three, starting in September, arguing that moderating growth and elevated borrowing costs will force the Fed’s hand.

Jerome Powell said the Federal Reserve could be in a "challenging scenario" with Trump's tariffs. Trump teased to fire him on Truth Social.

Powell, however, underscored that uncertainty in the economic outlook meant a wide set of outcomes remained possible. Should inflation come in weaker than expected or the labor market deteriorate ...

Powell described the overall economy and labor market as solid. He said inflation had eased significantly from highs reached in mid-2022, but was somewhat elevated above the Fed’s 2% objective.

Mr Powell warned that the true impact of Mr Trump’s trade ... The Federal Open Market Committee (FOMC) warned: “Uncertainty about the economic outlook has diminished but remains elevated.” It also raised its forecasts for the unemployment rate ...

The Federal Reserve kept its forecast for two rate cuts this year amid Trump's tariffs, which are expected to push up inflation and slow the economy