What's the biggest risk to the economy right now?

The Fed has to choose.

From Marketplace, I'm Sabri Beneshore in for David Brancaccio.

The Federal Reserve is meeting this week, and as it takes a look at the U.S. economy,

it is legally required to worry about two things, keeping as many people employed as possible,

and keeping inflation under control. So lots going on that could

affect both, the latest being conflict in the Middle East, affecting oil prices. Julia Corrado joins us now.

She's founder of macro policy perspectives. Julia, which one is the bigger risk, inflation or

unemployment? Well, the problem for the Fed is they don't know yet, which is the greater risk. What we do know is that they've been running above their inflation target for more than four years now. And while we got good news on inflation last week for May, it's still too early to see the impact of tariffs. And as you mentioned, now we have the prospect of higher oil prices.

So they really don't know whether the greater risk to the economy is a slowdown from all of the

things buffeting the economy, the changes in policy, the trade war, or higher inflation. And so I

think they're just going to continue to be in wait and sea mode.

Let's move to the world's second largest economy.

China, tariffs are showing up in the data.

Their factory output growth is down.

But retail sales there, consumers doing much better than expected.

Why would that be happening?

Well, China is prepared for a drawn-out battle. consumers doing much better than expected. Why would that be happening?

Well, China is prepared for a drawn-out battle on tariffs. What they have done is try to offset the inevitable hit to their manufacturing sector from the trade war and tariffs by boosting

their consumers with fiscal stimulus.

So we see that combination in the data.

Spending up a little bit that helps offset what is a pretty sizable drag to their manufacturing sector from tariffs.

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