The Federal Reserve is more likely to hold interest rates that are stable at the May 7-8 policy meeting. However, all eyes are in Jerome Powell's comments in the American state market, inflation, and the possibility of a backwards. Powell will discuss the press on the Fed's interest rate decision on 2 PM and Wednesday.
Markets are almost ruled out Any changes to the rate of federal funds this week. The Fedwatch's tool of the CME Group has assigned a 97% possibility that the central bank will maintain a current range of 4.25% to 4.50%. After making three cuts in 2024, the central bank has not touched the rate since last December.
Investors, economists, and policy manufacturers are waiting for Powell's statements at the post-meeting press conference to get clues about how the American economy can help.
No expectation of change, but all eyes to Powell
According to the first-quarter GDP data released last week, there is a 0.3% contraction with the real economic growth, which is less surprising to economists who expect President Donald Trump's policies to drop spending.
However, April saw a 177,000 nonfarm payroll work increase that could provide Powell and Central Bankers for more reasons to maintain borrowing rates.
“US tariff policy leaves future macroeconomic landscapes especially challenging to recognize“Says Erik Weisman, chief economist in MFS investment management. Powell, he added, almost certainly maintaining a careful” wait-and-see “stance.
This week Meeting Will be Powell's first major look as the new tariffs introduced by the Trump administration began to take place. The president of the United States slapped a 145% duty to some Chinese imports ignoring the tears of retailers who believed that the cost of these taxes would be passed on to American consumers.
Many analysts such as Torsten Slok, Chief Economist in Apollo, said market expectations are all pointing toward a US -based stagflation.
“Expected consensus for growth were modified, and expectations for inflation were modified. This is the meaning of stagflation. “
So far the Federal Reserve described the Inflation caused by tariffs as “transitorial,” it means expecting the price increase is short -lived. However, some officials are concerned that inflation expectations may be “without caution” if price pressure continues to slide the economy to Q3 2025.
Trump insists on Powell's pressure to cute rates
President Donald Trump still wants Powell and the middle bank to lower interest rates and certainly want the cut to come in July if not today.
CME Fedwatch data shows only a 3% chance of a rate cut off this week, but the rising probability by nearly 31% for the Fed June meeting and 80% in July. However, some economists believe that rate cuts will not come until late in the year.
Ryan Sweet, the US chief economist in Oxford Economics, said his firm expects the Fed to hold rates that are stable until December, if inflationary pressures may begin to retreat and the working market conditions may worsen.
Bill English, a former senior fed economist and professor at the Yale School of Management told CBS News that the Fed will not react because “they do not know how tariffs will affect consumers or businesses.”
“I want to know how Powell feels about the balance of risks at this point“English added,”I will be surprised if he has signed anything aloud somehow. “
Scott Helfstein, head of investment strategy in Global X, provided a wise summary of Fed's dilemma. “Feds and investors are finding themselves in a land without a person waiting to see if economic policies are driving prices higher and lower,” he said.
“There is no good reason to change rates at this point, and Fed is likely to rewrite the need for more data”Concludes Helfstein.
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