The Fed is preparing to announce a new nothing done on interest ratesin line with the prudent politics inaugurated by President Jerome Powell since the end of last year. Policy that attracted him and IRe of President Donald Trumpwho came to put under discussion the same independence of the Usa Central Bank, threatening the number one of the Federal Reserve several times. But this will not upset Powell’s sleep, which will go straight with his policy to contrast inflation, while a cut is not expected in the short, more likely in summer.
More likely cut in summer
The Fed, at the end of this meeting, should confirm the current level of interest rates, which oscillates in an interval between 4.25% and 4.50%. The next cut of the rates, after the three consecutive operated at the end of 2024, is expected for the month of June or maybe even in July And it should amount to 25 basis points. A much more prudent strategy of the ECB, also because the US economy has made better than the European one, albeit in slowing down, and inflation persists on much higher levels than in the euro area.
Bets on next moves FOMC Summarized by the Fedwatch future Listed on the CME, they indicate rates unchanged in May with a very high probability of 95.6%, still nothing done in June with a probability of 70.3%and a greater center in July (probability of 56.2%) of a cut of 25 basic points.
But what do analysts think about it?
“We do not expect explicit indications on the route path, but Powell should exclude precautionary cuts. Recent communications of the Fed and the solidity of the real data suggest that a intervention before the July Fed meeting is unlikely“, Analysts say about Pictet asset managementadding that “it is probable” that in this meeting, Powell underlines “the responsibility of the Fed in ensuring that the inflation determined by the duties does not become persistent and that the achievement of full sustainable occupation requires price stability”. “We expect President Powell to recognize that recent policy changes could temporarily deviate the economy from the double -term Fed – they add – reiterating that monetary policy is” well positioned “to respond to the evolution of the macro scenario”.
Experts of Carmignacin the same way, believe “Optimistic” the “market expectations of three cuts this yearstarting as early as July “and leaning for maintaining Die Tassi in the Target interval of 4.25% -4.50% in this week’s meeting. In fact, according to experts” it is unlikely that visibility on the fiscal front significantly before the summer “and above all” Powell’s legacy-like the president of the Fed that has fought inflation-is still in the definition phase “.
Also Federated Hermes judge “Highly unlikely” a cut of rates immediatelybut “it is likely that indications are provided on how the duties could accentuate the persistence of inflation and greater clarity on the contrast between data that provide a hard or soft landing”. In the face of persistent uncertainty, the experts however reiterate the “Need” of “three rates cuts in the second half of this year“.
Trump’s inflation and “pressure”
Powell’s work has become harder in recent months, fought between an inflation that persists above the target 2% (currently it is at 2.4% and is expected to 2.8% in 2025) and i repeated “attacks” of the President Donald Trumpwho has not only put under discussion The choices on interest rates, but has questioned the same independence of the Feddeclaring several times (and then immediately pulling back) that he could also remove Powell from his assignment. A situizone of severe nakeness that has already had reflections on the markets and dollar.
