The Federal Open Market Committee (FOMC) is expected to keep short-term interest rates steady at its meeting on May 7 as policymakers remain cautious amid ongoing economic uncertainty and await important data releases.
Market indicators are strongly pointing to a pause in interest rate changes. Fixed-income markets are predicting the federal funds rate will remain in the current range of 4.25% to 4.5%, according to the CME FedWatch Tool. Forecast markets Kalshi and Polymarket echo a similar sentiment, giving a roughly 90% probability that the FOMC will hold rates steady in May. But a June rate cut is increasingly likely.
Fed Chairman Jerome Powell signaled a patient approach in a speech on April 16, saying, “We are now well positioned to await further clarity before considering any adjustments to our policy stance.”
Fed Chairman Jerome Powell signaled a patient approach in a speech on April 16, saying, “We are now well positioned to await further clarity before considering any adjustments to our policy stance.” Powell’ın yorumları, yeni gümrük vergisi politikasını “ABD ekonomisini on yıllardır etkileyen en büyük şoklardan biri” olarak tanımlayan FED üyesi Christopher Waller’ın yorumlarını yansıttı.
As policymakers continue to assess economic conditions, the Fed will enter a pre-meeting communications blackout period on April 26. Any public comments will have to be made before that date.
The decision to delay any policy adjustments comes as mixed economic signals complicate the outlook. Soft data, including consumer and business sentiment surveys, pointed to growing concerns about an economic slowdown, while hard data remained relatively firm. The U.S. labor market continued to add jobs in March, with Consumer Price Index (CPI) inflation decreasing by 0.1% m/m in the same period.
Upcoming economic data, including the April employment report due May 2 and the consumer price index report due May 13, will be critical in shaping the Fed’s next moves. However, it may be the May economic data due in June that provides a clearer picture of the impact of recent tariffs and global economic changes.
Citigroup revised its forecast accordingly, expecting the Fed to make its next rate cut in June, a delay from its May estimate, while maintaining its outlook for a total of 125 basis points of cuts through 2025.
*This is not investment advice.
