Despite conflicting data on inflation, trade, and the labor situation, the Fed maintains rates at their current level.

The most influential organization in international finance is just as perplexed as the rest of us. The Federal Reserve's rate-setting committee held rates between 4.25 and 4.5% at its policy decision on Wednesday. Still, Chair Jerome Powell and his colleagues virtually admitted that they had no idea what might happen next. They were unable to accurately predict the final destination of President Donald Trump's tariff rates, let alone their effects on labor market conditions and consumer inflation.

They were also unable to correctly forecast the changing war between Israel and Iran, as well as abrupt changes to budgetary and immigration policies. Naturally, the biggest concern is that the Fed will be too slow to stop a possible rise in unemployment as a result of the uncertainty and dithering. This year, the median member of the Federal Open Market Committee predicted two rate cuts in the Summary of Economic Projections.

That "base case" is a significant oversimplification of the prognosis, even for the next three or four months, and some investors may be misunderstanding the size of the rear ends in the distribution of potential outcomes. Of the 19 respondents, 14 policymakers believed that the risks to their inflation projections were skewed to the positive. They also believed that the risks to their unemployment projections were skewed to the positive. Throughout the summer, they expect to learn a great deal more about tariffs.