Powell could struggle to escape Trump’s ‘Too Late’ tag despite Fed chief making the correct choices.

U.S. Federal Reserve Chair Jerome Powell speaks during a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, D.C., U.S., May 7, 2025. Kevin Lamarque | Reuters

History suggests that President Donald Trump’s new “Too Late” nickname for Federal Reserve Chair Jerome Powell has a strong chance of coming true, though he’d hardly be alone if it does. After all, central bank leaders have a long history of being too reluctant to raise or lower interest rates. Whether it was Arthur Burns keeping rates too low in the face of the stagflation threat during the 1970s, Alan Greenspan not responding quickly enough to the dotcom bubble in the ’90s, or Ben Bernanke’s dismissal of the subprime housing prices as “contained” and not lowering rates prior to the 2008 financial crisis, Fed leaders have long been criticized as slow to act absent compelling data showing them something needs to be done.

Some economists think Powell, faced with a unique set of challenges to the Fed’s twin goals of full employment and low inflation, has a strong chance of wearing the “Too Late” label. In fact, many of them believe that inaction may be the best course at this moment.

“Historically, go back and look at any Federal Reserve, and I’m going back into the ’70s, the Fed is always late both ways,” said Dan North, senior economist at Allianz Trade North America. “They tend to wait. They want to make sure that they won’t make a mistake, and by the time they do that, usually it is too late. The economy is almost always in recession.”

However, he noted that given the volatile policy mix, with Trump’s tariffs threatening both growth and inflation, Powell has little choice but to remain cautious without more clarity. Powell is in a no-win situation, with threats to both sides of the Fed mandate, and that’s why he’s doing what seems to be the right thing at this moment: holding steady, because any decision could potentially lead to a mistake.

Trump has been vocal about his belief that the economy will remain stable regardless of the Fed’s actions, yet he has been urging the central bank to cut rates, arguing that inflation has been controlled. In a recent statement following the Fed’s decision to keep rates unchanged, Trump labeled Powell as “Too Late,” criticizing his approach. He claimed there is “virtually NO INFLATION,” a statement that appeared accurate for March when the Fed’s preferred inflation gauge showed no change for the month. Nevertheless, the effects of Trump’s tariffs have yet to manifest in the economy, as they are relatively new.

Recent economic data do not show significant price increases or a noticeable slowdown in activity. However, surveys indicate rising concerns in both the manufacturing and service sectors, while consumer sentiment has diminished, with nearly 90% of S&P 500 companies mentioning tariff concerns in their quarterly reports.

During this week’s post-meeting news conference, Powell expressed confidence in what he referred to as a “solid” economy and a labor market “consistent with maximum employment.”

The 72-year-old Fed chair also dismissed any thoughts of a pre-emptive rate cut, despite sentiment survey data suggesting caution. “Powell offered two reasons for not being in a hurry. The first – ‘no real cost to waiting’ – is one he may live to regret,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, mentioned in a client note. “The second – ‘we are not sure what the right thing will be’ – makes more sense.”

Powell has a history of being late to act, as the Fed hesitated to raise rates when inflation began to surge in 2021. His team labeled that situation as “transitory,” which ultimately led to a series of aggressive hikes that still have not managed to bring inflation back to the Fed’s 2% target.

“If they’re waiting for the labor market to confirm whether they should cut rates, by definition they’re too late,” commented Joseph LaVorgna, chief economist at SMBC Nikko Securities and a senior economic advisor to Trump during his first term. “I don’t think the Fed is being forward-looking enough.”

Indeed, if the Fed relies on the labor market as a guide, it will likely be behind the curve. An old adage on Wall Street says, “the labor market is the last to know” when a recession is imminent, and historical trends indicate that job losses typically start only after a downturn has begun. LaVorgna believes that the Fed’s past behaviors may hinder its decisions, leading policymakers to misjudge the impact of tariffs.

“We’re not going to know if it’s too late until it’s too late,” he said. “Economic history combined with current market pricing suggests there’s a real risk the Fed will be too late.”