The Federal Reserve is likely to stabilize interest rates at its policy meetings from May 7-8. Still, all eyes lie in Chairman Jerome Powell’s comments on the state of the US market, inflation and potential recession. Powell will deal with news outlets regarding the Fed’s interest rate decisions at 2pm on Wednesday.
There are almost all of them in the market I’ve excluded Federal funding rate changes this week. CME Group’s FedWatch tool assigns a 97% chance that the central bank will maintain its current target range from 4.25% to 4.50%. After making three cuts in 2024, the central bank has not touched on the rates since December last year.
Investors, economists and policymakers await Powell’s remarks at a post-meeting press conference, giving clues on how the Fed will help the US economy.
No change is expected, but all eyes turn to Powell
According to first quarter GDP data released last week, actual economic growth had a contraction of 0.3%. This was not surprising to economists who hoped that President Donald Trump’s policies would cut spending.
But April saw an increase in non-farm payroll employment of 177,000 allowed Powell and the central bankers to increase the reason to maintain borrowing rates.
“The disruption in our tariff policy is particularly challenging to identify future macroeconomic landscapes.said Erik Weisman, chief economist at MFS Investment Management. Powell is almost certain to maintain a careful “wait” stance.
this week Meeting It will be Powell’s first major public appearance as new tariffs introduced by the Trump administration take effect. The US president slapped a 145% obligation on certain Chinese imports, ignoring the cries of retailers who believe the costs of these taxes would be passed on to American consumers.
Analysts like Torsten Slok, Apollo’s chief economist, said all market expectations refer to US-based stagflation.
“The expectations for consensus on growth have been revised, and expectations for inflation have been revised. This is the definition of a stag. ”
The Federal Reserve has explained so far inflation To be caused by tariffs as “temporary” means expecting price increases to be short-lived. Still, some officials are concerned that inflation expectations could be “uncharded” if price pressures continue to cloud the economy in the third quarter of 2025.
Trump builds up pressure on Powell to cut interest rates
President Donald Trump still hopes that Powell and the central bank will cut interest rates, and that if not today, the cuts will definitely come in July.
CME FedWatch data shows that rate cuts are only 3% this week, but the Fed’s June meeting will have a chance of about 31%, up 80% by July. Still, some economists believe interest rate cuts will not arrive until much later in the year.
Ryan Sweet, US Economics President of Oxford Economics, said his company expects the Fed to stabilize until December, when inflationary pressures may begin to settle and labor market conditions may worsen.
“The Fed won’t respond because they don’t know exactly how tariffs affect consumers and businesses,” Bill English, a former senior Federal Reserve economist and professor at Yale Management School, told CBS News.
“At this point, I want to know how Powell feels about the balance of risk.English added, “You’ll be surprised if he signaled something strong either way. ”
Scott Helfstein, Head of Investment Strategy at Global X, provided an insightful summary of the Fed’s dilemma. “The Fed and investors have found themselves in lands with no one waiting to see if economic policies will raise prices and reduce growth,” he said.
“There is no good reason to change the rate at this point, and the Fed may be repeating the need for more data.Helfstein concluded.
Key Difference Wire: Crypto Project, a secret tool used to get guaranteed media coverage
