CFOs need a new 'playbook' for tariff-fueled uncertainty

Good morning. The Federal Reserve announced on Wednesday it would leave interest rates unchanged as more clarity is needed about where the economy is headed as a result of changes to U.S. trade policy.

The federal funds rate, which banks use to borrow from one another overnight, remains at a target range of 4.25% to 4.5%. Although economic activity continues to expand at a solid pace, inflation remains somewhat elevated, the Federal Open Market Committee said in a statement. “Uncertainty about the economic outlook has increased further.”

“There’s so much uncertainty about the scale, scope, timing, and persistence of the tariffs,” Fed Chair Jerome Powell said during a press conference on Wednesday. There’s an expectation that inflation will move further above target. “It’s not a situation where we can be preemptive,” he said.

Powell’s comments underscore a critical reality for business leaders, according to Gregory Daco, chief economist at EY. “For businesses, this means two things,” Daco explained. “First, monetary policy may not provide the usual cushion against shocks from tariffs or broader geopolitical disruptions in the near term. Second, companies should brace for prolonged ambiguity in interest rate expectations and economic momentum.”

As a result, firms may need to recalibrate their strategies, Daco said. Hiring plans should emphasize flexibility, he explained. Investment decisions, meanwhile, should prioritize resilience, focusing on efficiency gains, supply-chain reconfiguration, and cost control, rather than large-scale capacity buildouts, he added. “In essence, this is a time for strategic patience and operational agility,” Daco said.

The uncertainty created by the White House combined with inflation, which remains above the Fed’s targets, together “conspire to make it very difficult for the Fed to cut at any point this year,” Brett House, an economist and professor of professional practice at Columbia Business School, told me.

“The erratic articulation and implementation of the White House’s tariff policy has put a chilling effect on businesses, their decision-making processes, and investment and hiring decisions,” House said. It’s incredibly difficult to price risk, to borrow, to invest and hire with any expectation or clear view on what the potential returns from those actions are going to be, he said.

Coming into 2025, CFOs were facing much less uncertainty than during the pandemic, or that they face now, House said. “The uncertainty that CFOs are facing now is solely a byproduct of policy decisions and the manner in which they’re being brought forward by this White House,” he said. “That calls for a different playbook than in the past.” Predicting that mindset of the president regarding tariffs is “incredibly difficult,” he added.

Powell’s acknowledgment that the economy could deteriorate despite its current strength serves as a cautionary signal, Daco said. “For businesses, the key is to prepare without overreacting,” he said. “That means reinforcing balance sheets, securing access to liquidity, and scenario planning around a wider range of outcomes—particularly those that include slower demand, tighter financial conditions, and potential supply disruptions linked to tariffs.”

Sheryl Estrada
sheryl.estrada@fortune.com

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