The bond market is in focus as Trump and his advisers push for lower rates.

The Fed gathered at a highly volatile moment for the economy and the global financial system amid an onslaught of policy changes from Mr. Trump just months into his second term in the White House.

In a statement on Wednesday, the Fed acknowledged that the labor market was still “solid.” But policymakers also noted that “uncertainty about the economic outlook has increased further” and “risks of higher unemployment and higher inflation have risen.”

At a news conference after the statement, Jerome H. Powell, the Fed chair, said he could not yet say “which way this will shake out” in terms of whether to be more worried about inflation or growth.

He later captured the uncertainty of the moment, saying “It’s really not at all clear what it is we should do.”

Since the Fed’s last meeting in March, the administration announced and then rolled back aggressive new tariffs as Mr. Trump gave countries time to reach trade deals ahead of a July deadline. Still, a 10 percent universal tariff remains in place, along with additional levies on steel, aluminum and cars. The president has also imposed a minimum tariff of 145 percent on Chinese goods.

The whiplash has unnerved financial markets, stoking volatility as Wall Street digested the various twists and turns associated with Mr. Trump’s trade policy and his subsequent attacks on Mr. Powell for ignoring his demands to lower interest rates. Last month, investors started to flee what are considered financial “safe havens,” signaling that markets had come under strain.

The upheaval has created complications for the central bank. It is struggling to both assess the economic fallout from Mr. Trump’s policies and game out how it will set monetary policy in an environment in which its goals of maintaining a healthy labor market and keeping inflation low and stable may be in conflict.

Officials have grown increasingly worried about how much Mr. Trump’s policies, which also include slashing spending and deporting immigrants, will sap growth. Some companies have already started to warn about sluggish sales as consumers have turned much more downbeat about the outlook; the fear is that the uncertainty will further chill business activity.

But unlike in the past, the Fed is not in a position to respond to early signs that the economy is weakening by preemptively lowering interest rates. That is because of inflation: Price pressures stemming from the post-pandemic surge have not been fully snuffed out, and now Mr. Trump’s tariffs risk rekindling them.

It is too early to tell if the tariff-induced jump in inflation will prove to be temporary, or if it morphs into something more persistent. So far, market-based measures of inflation expectations, to which the Fed pays closest attention, suggest that inflation will indeed remain contained after an initial pop. But officials do not want to make the same mistake as they did just a few years ago, when they underestimated how long lasting inflation would prove to be. While officials originally expected inflation to fade after pandemic-induced supply snags, it instead persisted.

As such, the bar for the central bank to lower interest rates is higher this time.

Officials will most likely need to see tangible evidence that the labor market is beginning to weaken before restarting cuts. If monthly jobs growth grinds to a halt, or turns negative, and layoffs rise, that could be enough to bolster the central bank’s conviction that it can begin to reduce rates.

But waiting to see that show up in the data may mean that the Fed has moved too late, potentially prompting the need for officials to cut more aggressively later on.

Asked about the federal budget, Powell declines to make any recommendations to Congress, but says — as he has in the past — that the debt “is on an unsustainable path.”

Powell doesn’t elaborate too much more on what the Fed will do if the central bank’s goals clash with one another. He reiterates that it will be a “difficult judgement.”

Powell contrasts the situation today to that in 2019, when the Fed made a series of preemptive cuts to forestall an economic slowdown. The big difference this time, he says, is that inflation is still running above its 2 percent target.

It was interesting that he said the couple of cuts the Fed made last fall were not preemptive, but rather a reaction to evolving data. “If anything it was a little late,” he said.

This has been Powell’s core message for a while now: The economy is in basically solid shape, which allows the Fed to be patient and see how the situation develops.

The situation would be different if inflation were still very high or if the unemployment rate were rising. But as things are now, the Fed has the luxury to “wait and see.”

Powell says the Fed’s policy settings are still restrictive and emphasizes that the Fed is not in a hurry to take action.

“We think we’re in a good position where we are to let things evolve,” Powell said.

Ten-year U.S. treasury yield

Moves in the market for U.S. government bonds have emerged as a pain point for Mr. Trump. In particular, the president flinched last month after a sharp rise in the yield on the 10-year Treasury note, which underpins borrowing costs on mortgages, credit cards and corporate debt, announcing a pause in some planned tariffs and exemptions for certain products set to be hit with levies.

Treasury Secretary Scott Bessent has said that the Trump administration is more focused on the 10-year Treasury yield as a measure of its success when it comes to lowering rates. The Fed does not have direct control over the 10-year yield, which reflects investors’ views on the economy, inflation, the government’s borrowing needs and predictions for Fed policy in the years ahead.

A spate of selling in April pushed the yields on the 10- and 30-year Treasuries up by about a half a percentage point over the course of a week, the biggest spike in decades. (Yields move inversely to prices.) The 10-year yield has since stabilized and was down slightly on Wednesday just before the Fed’s interest rate announcement, at 4.28 percent. In early April, before Mr. Trump announced steep “reciprocal” tariffs on nearly every U.S. trading partner, the 10-year yield fell to roughly 4 percent.

Mr. Bessent has also pointed to the yield on the two-year Treasury, which tends to more closely follow Fed rate moves than the 10-year yield, in arguing for the Fed to cut rates. The two-year yield was roughly 3.8 percent on Wednesday, below the Fed’s target rate range of 4.25 to 4.5 percent — a “market signal” that the Fed should cut the rate it controls, Mr. Bessent argued in an interview with Fox Business last week.

Mr. Trump has repeatedly pressured Mr. Powell to ease the Fed’s benchmark rate. He recently called Mr. Powell “Mr. Too Late” and a “major loser” for refusing his demands to reduce borrowing costs, unnerving investors who see the independence of the central bank as critical to the health of the U.S. economy.