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Federal Reserve policymakers’ aims to curb inflation while maximising employment are “pulling them in diametrically different directions” as Donald Trump’s trade war upends the economic outlook, the head of Fidelity’s $2.3tn fixed income business has said.

Robin Foley told the Financial Times that the US central bank’s “inflation fighting is all well and good, but employment still remains to be seen”. She added that the central bank was in a “tough spot”.

Foley’s comments come as the Fed has this year paused a rate-cutting cycle that began in 2024 as Trump’s levies on big trading partners threaten to increase inflation and hit the jobs market.

Recent economic reports have suggested the Fed has made progress in pushing inflation towards its 2 per cent target while unemployment has remained subdued. But surveys have shown Americans are growing increasingly worried about their employment prospects, while many companies have warned tariffs could lead to price increases.

Fed chief Jay Powell said last month that “we may find ourselves in the challenging scenario in which our dual-mandate goals are in tension”.

Foley, who has worked at Boston-based Fidelity for 39 years and keeps a lower profile than many industry peers, noted that over the past year there had been “wildly volatile” shifts in expectations for interest rates among market participants. Trading in futures markets suggests investors expect the Fed to resume cutting borrowing costs in September, significantly later than forecasts at the start of the year.

Foley added that it appeared that the intense volatility in the US government bond market following Trump’s so-called “liberation day” announcement of sweeping tariffs on April 2 had been one reason why the president ultimately eased his stance on levies.

Despite the market tumult, Foley said Fidelity had been “overweight risk” against the main benchmarks in some of its fixed income strategies, “but not excessively so”.

Almost a third of the asset manager’s flagship Total Bond Fund sat in corporate bonds as of March 31, relative to just a 25 per cent allocation within a fixed income index tracked by Bloomberg. The same flagship fund had less than a third of its holdings in US government debt, below the benchmark’s 46 per cent position.

With interest rates remaining elevated, “there’s very attractive yield in the market now”, said Foley, “even in the form of US Treasuries; that was not true for a very long time”.

“With that as a backdrop, you really need to be compensated to take on incremental credit risk,” she added.

Athletic retailer Dick’s Sporting Goods plans to buy Foot Locker, the seller of shoes in many a shopping mall, for about $2.4 billion.

Dick’s is the largest sports retail chain in the U.S. It’s been on strong financial footing, but it doesn’t have reach outside the country.

Foot Locker, for its part, has struggled as a mall-based chain, but it has a massive footprint of stores — about 2,400 across 20 countries. Dick’s says Foot Locker has a broad range of shoppers to bring to the chain.

“The Foot Locker banner, which brings a more urban consumer and exposure to basketball and sneaker culture, can complement Dick’s customer who skews toward athletes and suburban families,” analyst Cristina Fernández of Telsey Advisory Group wrote in a note on Thursday.

Still, Dick’s investors did not welcome the news, given Foot Locker’s declining sales and waves of store closures. They sent the stock tumbling more than 14% on Thursday.

Ed Stack, executive chairman, appeared to address this in his statement, saying his company “long admired the cultural significance” built by Foot Locker.

“We believe there is meaningful opportunity for growth ahead,” Stack said. “Together, we will leverage the complementary strengths of both organizations to better serve the broad and evolving needs of global sports retail consumers.”

Combined, the two retailers will have to wade the choppy waters of new tariffs on imports, including footwear. And they’ll face the growing challenge of big brands trying to sell more shoes directly to shoppers themselves.

“By joining forces with DICK’S, Foot Locker will be even better positioned to expand sneaker culture, elevate the omnichannel experience for our customers and brand partners, and enhance our position in the industry,” Foot Locker CEO Mary Dillon said in a statement.

Dick’s says it plans to keep Foot Locker as its own chain under its own name after the deal goes through in the second half of this year. Foot Locker shareholders and government regulators still need to approve it.