April’s Personal Consumption Expenditures data presented a complex picture for Jerome Powell, with economists suggesting the persistent cloud of tariff uncertainty compels the central bank to “wait and see” policy stance even as “disinflation” has set in.

What Happened: The April PCE report, the Federal Reserve’s preferred inflation gauge, revealed a deceleration in headline inflation to 2.1% annually, marking the lowest print for the year so far. Core PCE, excluding volatile food and energy prices, also eased to 2.5% from a revised 2.7% in March.

This data confirms a trend of “continued disinflation,” a point highlighted by Jamie Cox, the managing partner for Harris Financial Group, who remarked, “This PCE report confirms continued disinflation, despite the refrain from everyone that disinflation isn't possible in this environment. As Alan Greenspan would have said, it's a conundrum.”

Despite this positive development, the broader economic landscape is clouded with uncertainty, primarily due to tariff turmoil, which has now entered the courts.

Jeffrey Roach, the chief economist for LPL Financial, noted that while the stable job market, evidenced by a rise in the savings rate to a one-year high of 4.9% and robust real disposable personal income growth of 0.7%, provides support for households, the fluid tariff policy poses an “upside risk to inflation.”

He stated, “As long as the job market remains stable, the Fed has the luxury of remaining in ‘wait and see’ mode. We think there is upside risk to inflation as many baseline forecasts cannot reasonably account for the fluid tariff policy.”

This sentiment was also echoed by Chris Zaccarelli, CIO at Northlight Asset Management. Zaccarelli suggests that the Fed’s relative silence this year is a result of a lack of significant inflation or unemployment surprises, allowing them to keep rates unchanged.

However, he warns that “At some point, the tariff uncertainty has to be addressed.” He points out that if clarity on tariffs isn’t achieved quickly, and the economy begins to stall, the Fed might be forced into aggressive rate cuts – a scenario he cautions against for those hoping for immediate easing.

See Also: Trump Administration Set To Ease Big Bank Rules In Major Rollback Since 2008 Crisis: Here Are The Stocks And ETFs Investors Could Consider

Why It Matters: The core of the “puzzle” lies in the interplay of these factors: seemingly benign inflation and a stable job market that would typically allow for patience from the Fed, versus the unpredictable impact of tariffs, which could be inflationary in nature.

Meanwhile, the Federal appeals court lifted a temporary pause on Donald Trump‘s tariffs, which were earlier invalidated by the Court of International Trade.

This, as China violated the trade terms, as highlighted by Trump in a Truth Social post and echoed by Treasury Secretary Scott Bessent, who clarified that China was withholding critical minerals it agreed to release in a trade deal the country signed with U.S. negotiators last month in Geneva.

Price Action: The SPDR S&P 500 ETF Trust ( SPY ) and Invesco QQQ Trust ETF , which track the S&P 500 index and Nasdaq 100 index, respectively, fell in premarket on Monday. The SPY was down 0.33% at $587.47, while the QQQ declined 0.42% to $516.95, according to Benzinga Pro data.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.