Chart #1 —
Fed leaves rates unchanged
The Fed held interest rates steady, opting not to mirror the European Central Bank’s recent rate cut. It maintained its stance on US economic growth as "solid," downplaying the weak Q1 GDP by attributing it to a temporary surge in imports. Despite growing uncertainty, the Fed’s forward guidance remains unchanged.
“The committee … judges that the risks of higher unemployment and higher inflation have risen”, stated the Fed’s Powell. Currently, Powell faces the most difficult scenario for any Fed president. The Federal Reserve's dual mandate is to promote two main economic goals: maximum employment and price stability—with uncertainty is on both sides.
This decision is likely to provoke criticism from President Trump, especially as other major central banks, including the ECB and the PBOC, move to ease policy in anticipation of a disinflationary shock.
Powell emphasised there is no urgency to adjust rates, reflecting the Committee's current stance. Markets now anticipate a rate cut by the end of July, whereas just a month ago, a cut by June was considered almost certain. The probability of a June cut has since dropped below 24%.
Source: Bloomberg, HolgerZ