This week, Jerome Powell will likely chair the Federal Reserve’s interest rate setting committee meeting for the last time.

U.S. Attorney Jeannie Pirro has dropped her investigation into Chairman Powell’s congressional testimony concerning renovations to the Fed headquarters. That clears a path for Senator Tillis to lift his hold on Kevin Warsh’s nomination to succeed Mr. Powell in the Senate Banking Committee.

Majority Leader Thune should be able to engineer a Senate confirmation vote before Powell’s term as Chair ends on May 15. hi

With this leadership uncertainty resolved, the economic outlook still remains uncertain, clouded by tariffs and wartime disruptions to labor and commodity markets that make extraordinarily difficult accomplishing the Fed’s mandate to maximize employment and achieve price stability.

President Trump’s tariffs are intended to rearrange supply chains—impel U.S. businesses to source more domestically of what they sell at car dealerships, stores and online and in any case, less from Chinese suppliers.

U.S. imports from China are down, but purchases have mostly shifted to other foreign sources like Mexico, Vietnam and Taiwan.

Huge U.S. global trade deficits persist, because Americans borrow and attract investment from abroad to help finance epic investments in Artificial Intelligence,, other projects and a federal deficit that has grown to about 6% in 2026.

Net foreign capital inflows permit Americans to consume more than they produce, such as for defense, social security and healthcare, by importing more than they export.

Outside of AI and data centers, domestic business investment isn’t growing. New factory construction fell in 2025, as did manufacturing employment.

President Trump’s deportation policies have reduced the number of foreign workers entering the labor force.

Whereas the economy created 135,000 jobs monthly during the first Trump and Biden Administrations, it’s now capable of adding 50,000 to perhaps 70,000 with unemployment steady.

Outside of healthcare, employment has been contracting.

Only an average of 21,000 jobs were created monthly from the end of 2024 through last March. Healthcare added 33,000 jobs, while the rest of the private and public sectors shed jobs.

Some sectors, like social assistance and leisure and hospitality, gained jobs, while employment in others, like insurance and manufacturing, contracted.

Many workers are being displaced by AI—roles are being combined and redefined—and those losing positions often face terribly tough job searches.

A Goldman Sachs study estimated that AI eliminates about 16,000 jobs a month.

However, an analysis by LinkedIn found AI created about 640,000 new positions from 2023 to 2025—about 27,000 jobs a month.

In juxtaposition, those studies indicate that AI could be a net jobs creator or at least is neutral.

Those cast doubt on Anthropic CEO Dario Amodei’s warnings that AI threatens a jobs apocalypse and OpenAI’s suggestion that more big government—mandated four day work weeks, lifetime incomes for displaced workers and taxes on robots—should subvert the sound functioning labor markets.

About a third of new positions were for heads of AI. Others include staff to write software to automate tasks, forward engineers that AI and other software companies send to customers to teach employees how to use their new tools and annotators that label data to train AI agents.

All this helps explain the mystery of how GDP grew 2.1% last year while employment, outside of healthcare, contracted.

The Fed raising interest rates to combat inflation might slow AI buildout and its benefits but would do little to contain inflation.

According to the March jobs report, wages are growing 3.5% annually. Coupled with productivity growth at about 2%, that’s consistent with the Fed’s inflation target of 2% a year.

In March, the Consumer Price Index rose 3.3% over the last 12 months. Much of that was the continuing pass through of tariffs—U.S. businesses and consumers pay 90% of those taxes and only 10% is absorbed foreign exporters—and a war-induced jump in oil and other commodity prices.

Rising prices for gas, diesel and consumer services, like airline tickets, are apparent. But disruptions to Persian Gulf industries and shipping are also raising international shipping, air freight and domestic trucking rates and pushing up prices for aluminum, precursors for plastics fertilizer and helium to fabricate semiconductors.

Those will filter into consumer prices for groceries, cars, computers, heating fuels and many services, including rents for homes and apartments.

Ultimately, those will harden household expectations that elevated inflation will continue.

Significantly, inflation is supply-driven and raising interest rates to curtail consumer spending and business investment wouldn’t help, because so many of these phenomena are driven in international markets by disruptions to production and shipping from the Persian Gulf.

Similarly, the economy hardly needs lower interest to boost consumer spending, which as March retail sales indicates remain robust.

Fed policymakers would do well to punt on interest rates and leave a blank slate for Mr. Warsh to articulate his vision.

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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.