The Fed's Impossible Choice
April 26, 2026
4.25–4.50%
Fed Funds Rate
held steady as of May 2025 FOMC meeting
+15%
Tariff-Driven Input Cost Rise
avg. farm input cost increase since tariff implementation (AFBF)
~70%
Soybean Export Risk
of U.S. soybean exports historically to tariff-affected markets
−0.5 to −0.9 pp
GDP Growth Drag
CBO projected GDP impact of broad tariff implementation in 2026
3.4%
CPI Inflation
March 2025 year-over-year, up from 2.8% in Dec 2024
Fed Funds Rate (upper bound) vs. CPI year-over-year inflation, 2019–2025. Presidential terms shaded. The converging lines in 2025 illustrate the stagflation trap: inflation rising again while growth slows.
Fed Funds Rate (%)
CPI YoY (%)
Republican
Democrat
Sources: Federal Reserve FRED, BLS CPI
Hold Rates
Keep at 4.25–4.50%
Inflation: Persistent 3–4%, tariff costs embedded
Growth: Sluggish 1.0–1.5% GDP, farm investment constrained
⚠ Stagflation entrenches
Cut Rates
Reduce 50–100 bps by year-end
Inflation: Risk of re-acceleration above 4%
Growth: Modest lift, but offset by trade uncertainty
⚠ Inflation re-ignites
Raise Rates
Hike 25–50 bps
Inflation: Modest reduction in demand-side pressure
Growth: Recession risk rises sharply; farm credit tightens
⚠ Demand destruction
Key Questions
Data sources: Federal Reserve (FRED), USDA ERS, BLS CPI, American Farm Bureau Federation, CBO Economic Outlook 2026, USDA FAS Trade Data
Data sources
Federal Funds Rate (DFEDTARU) — Historical Series· Federal Reserve Bank of St. Louis (FRED)Consumer Price Index for All Urban Consumers (CPIAUCSL)· U.S. Bureau of Labor Statistics via FREDFarm Production Expenditures Annual Summary· USDA Economic Research ServiceU.S. Agricultural Export Destinations — GATS Database· USDA Foreign Agricultural ServiceAmerican Farm Bureau Federation — Tariff Impact on Farm Inputs· American Farm Bureau FederationCBO Budget and Economic Outlook 2026–2036· Congressional Budget OfficeFOMC Meeting Statement — May 2025· Board of Governors of the Federal Reserve System