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On April 16, 2025, the chairman of the federal reserve system Jerome Powell appeared at Chicago’s Economics Club, Illinois.
Camille Krzachinsky | AFP | Gets the image
The federal reserve system enters into its closely monitor the political decision on Wednesday with a strong incentive to do absolutely nothing.
Faced with unresolved issues regarding the tariffs for President Donald Trump and the economy, which signals significant and weaknesses, the Central Bank’s policies can do little except sitting and waiting as the events are deployed.
“This meeting will be uncomfortable. There is no forecast to convey something about the following couples,” said Vincent Reinhart, a former long-time Fed official, and now the chief economist of Bny Investments. “The Fed should wait for two things: it sees that politics actually goes to the place … But when it is demonstrated, you need to see how inflation is reacting. So, the Fed must delay and then go slowly.”
Indeed, prices for the futures market imply Practically no chance of reducing interest rate At the meeting this week, and only about the likelihood of moving to June 1 at the session of June 17-18, the CME group reports Fedwatch caliber.
Last week market expectations have changed in response to both mixed economic signals and signs that President Donald Trump Getting at least a little less aggressive In its tariff approach. The White House signaled that several trade transactions are approaching completion, although no one is announced yet.
Reinhart said that his firm had two cuts this year, which is a little tougher than the market expectations for three cuts since July. A week ago, the markets relied on four cuts, starting in June.
Direction from Powell
Fed the chair Jerom Powell He will remain after a meeting with a press conference to explain his thinking and his colleagues about where they see politics.
“Another unsatisfactory part – they don’t know what they will do in June,” Reinhart said. “So he will need to say that everything is on the table. He always talks about it, but this time he will need to mean it.”
Powell, however, will definitely face how politicians see the recent data that has drawn a picture of the economy loaded with pessimism from consumers and business executives, which should still be firm, for example, costs and employment.
While The gross domestic product fell by 0.3% on the annual rate In the first quarter, this was largely a product of import growth on the eve of Trump tariffs on April 2. April A salary report with an overwhelming salary He showed that he was going on at a solid pace, and the economy added more than expected, 177,000 jobs per month.
At the same time, the survey of the production and service sectors shows a deep concern with inflation and impact on tariffs. Also, Consumer optimism is on long -term lows While inflation expectations are in several decades.
All this adds to the sewer for Powell and Ko to walk at least on the June meeting.
This time there is no “point section”
“The Fed is going to design in its statement, in its press conference” Patience. “Too great uncertainty is currently valid, but prepare for action when they begin to see weakness in the employment market.”
Nuveen also expects only two cuts this year and two more next year, as the Fed moves with a slowdown in price and tariff rising prices.
“We expect you to see nothing at this meeting,” Rodriguez said. “They just have to see tougher data that, as we don’t think, will become really clear until it call it June or July. I would think the September meeting is the first cut.”
At this meeting, the Fed does not update its economic forecasts, nor the “point section” of certain expectations of the interest rates. This will come in June. Thus, the open market federal committee, which set the rate, will remain in the statement after the meeting and Powell’s press conference to refuse possible hints on its collective thinking.
“We think it will take a couple of months to stock up on solid data to make the case to reduce,” said the Goldman Sachs economist David Merle in the note. Goldman expects the Fed to cut in July, September and October, seeking to abandon the economic weakness that the firm is expected to priority over inflation problems.
One wild card in the equation: Trump as it did during his first term, calls on Fed to cut rates As inflation approaches the target of the central bank.
However, Reinhart, economist BNY, does not see the Fed flexion to Trump’s freedom and not violating the ranks, despite the public statements of some members who show the division of politics.
“The White House did Jay Powell’s grace, keeping his committee together. Because, as a rule, when the family is criticized outside, he is less willing to criticize each other,” Reinhart said. “You criticize Jay Powell now and build yourself president?
