Economic Data Suggests the Fed Will Continue to Wait and See

Ahead of this week’s meeting of the Federal Open Market Committee, the question is not so much whether the Fed will cut its policy rate now (almost certainly not), but more whether Jerome Powell and his colleagues still expect to make any downward adjustments this year at all. According to the projections released after the FOMC’s March meeting, nine of the 19 committee members expected two 25-point cuts by the end of 2025, while two Fed officials expected three cuts, four expected just one and another four didn’t foresee any changes at all this year.

In his press conference after the latest meeting, Fed Chairman Jerome Powell, who’s under intense pressure from President Donald Trump to further cut interest rates, told reporters that the Fed was in a very good position to wait and see, as none of the Fed’s two goals, i.e. maximum employment and 2-percent inflation, appeared to be out of sight under current conditions. With both the unemployment rate and CPI inflation relatively stable since March at 4.2 and 2.4 percent, respectively, there’s little reason to believe that Powell and his colleagues will come to a different conclusion this week.

Considering the current prediction that GDP growth is going to rebound sharply in the second quarter makes an imminent rate cut even less likely, as a return to growth would likely ease recession fears, restore consumer and business confidence and thus further stabilize labor market conditions. The current outlook is still clouded in uncertainty, however, which is why it makes a lot of sense for the Fed to await the outcome of ongoing trade negotiations and observe the effect of tariffs on consumer prices for a couple more months before making its next move.