Stagflation Risk Is Real Now

The Fed held rates. Trump held up a tariff board.

And traders like us are left watching gold coil while the risk of stagflation creeps back into the conversation.

Last week’s Fed meeting wasn’t subtle. Powell didn’t hedge. He didn’t sugarcoat. He flat-out said Trump’s tariff plans are likely to trigger higher inflation, lower growth, and more unemployment.

That’s not hawkish. That’s a warning.

And with Trump refusing to walk back the 145% tariff on China, or even pretend to negotiate, the Fed knows this could get ugly fast.

What the Fed Actually Said

• Rates stay at 4.5%

• Growth outlook revised down

• Inflation outlook revised up

• Blame placed squarely on Trump’s trade war 2.0

It’s not just a chart problem, it’s a policy problem.
The Fed sees tariffs as a tax on consumers. And this time, they’re not hinting, they’re saying it.

Jerome Powell: “The proposed tariffs are substantially larger than anticipated and are likely to generate a rise in inflation, a slowdown in economic growth, and an increase in unemployment.”

Stagflation. Not a forecast, a scenario they’re actively preparing for.

Trump’s Move: Pause, But No Pullback

Yes, the tariffs were “paused” after backlash. But Powell’s tone shows they’re not counting on that pause lasting.

Trump isn’t backing down. He’s not negotiating. And he’s already said he won’t lift the tariffs on China to restart talks.

The Fed isn’t working off Twitter hope, they’re working off risk management. And that’s what traders should be doing, too.

Why the Fed Is Spooked?

Let’s be real: the Fed doesn’t usually name names.

But this time, Powell didn’t just reference “trade policy”, he directly tied the economic slowdown to Trump’s tariffs. That’s rare.

Here’s what else happened during the May 7 meeting:

• Interest rates were held at 4.25–4.5%

• Inflation forecasts went up

• Growth forecasts went down

It only means, they’re expecting prices to climb and the economy to slow, which puts them in a lose-lose. If they cut rates to help growth, inflation explodes. If they hike rates to fight inflation, unemployment ticks higher.

That’s a corner no central bank wants to be backed into.

This Changes How We Trade

What we’re seeing now is classic macro compression. Markets are holding, not trending, waiting for the next policy shoe to drop.

This environment = traps.

• Gold gets bid, then stalls.

• USD weakens on fear, then rallies on risk-off.

• Indices pump on rate-hold, then dump on stagflation fears.

This isn’t just noise. It’s compression before the event.

And when that event comes, a tariff escalation, a Fed pivot, or CPI spike, the market won’t move slowly.

Final Thought: The Market’s Not Crazy It’s Just Political

You’ll see volatility ramping up. You’ll hear analysts saying the Fed is “behind the curve” or “cornered.” You’ll hear traders complaining that the market is “irrational.”

But it’s not irrational. It’s just reactive, to politics, not price.

And when central banks start naming presidents, you better believe the price chart isn’t going to explain it all.

This is one of those moments where being a trader isn’t just about reading levels, it’s about reading the room.

And right now?

The room smells like stagflation.