Fed is widely expected to leave its benchmark interest rate unchanged at 4.25–4.50% today. With no update to its economic projections or dot plot this time, attention will turn squarely to the post-meeting statement and Chair Jerome Powell’s press conference.
The prevailing message is likely to be one of patience, as policymakers face mounting uncertainties tied to the unresolved tariff war and its eventual economic impact.
Central to Fed’s wait-and-see approach is the need for clarity on two fronts: whether US President Donald Trump’s reciprocal tariffs are fully enacted, and how inflation expectations evolve in response. These factors, especially in light of ongoing geopolitical and trade risks, argue against any near-term policy moves.
As such, June is seen as too soon for a shift, with the expected to remain on hold until more definitive clarity emerge, probably not until the tariff ceasefire expires in early July.
Market pricing reflects this outlook top. Fed funds futures assign just a 32% chance of a cut in June, but expectations firm up thereafter, with roughly 75% probability of three 25 bps cuts by year-end, bringing rates down to 3.50–3.75%.
