“The Fed is in a challenging position,” said Betsey Stevenson, a former chief economist at the Labor Department who is now a professor at the University of Michigan. “They need to be really careful that what they’re seeing is actually weak labor demand and not contracting labor supply caused by Trump’s policies, and that’s tricky.”
Ms. Stevenson warned that the Fed’s credibility was on the line if it ended up having to flip-flop on its policy decisions — for example, lowering interest rates in September only to raise them again six months later.
“If you can see the potential to move in either direction, just wait for more data,” she said.
