A new one is expected nothing done on interest rates by the Federal Reservewhich tonight will make known the decisions of monetary policy. The rates of oscillation of the rates on Fed Funds should be confirmed to 4.25%-4.50% For the fourth consecutive meeting, while no cuts are expected until September and, for the rest of the yearexpectations still focus on two interventions.
The slowdown of US inflation will not change The prudent attitude of the Fedwhich until the whole summer should not surprise with any retouches of interest rates, keeping a cautious attitude and awaiting, In spite of Trump’s continuous pressing on Powell.
“Well calibrated” monetary policy
“From the last FED meeting, L‘Inflation showed signs of slowdownthe growth was modest and the voltages have faded “, underlines Xiao to whom, Senior Economist of Pictet Wealth Managementanticipating that “President Powell will probably reiterate that the monetary policy is well calibrated And it will underline the importance of keeping inflation expectations anchored “.
On this base Pictet, awaits that the updated dot plot reflect a more restrictive orientationwith the projection of the median rate for 2025 to 4.125%, which would imply only one cut compared to the two cuts expected in the March projections. For 2026, the graphic designs are expected to monster with three rates cuts, maintaining the same projection as 3.375% indicated previously.
Prudent approach with possible inflation ascent
“Given the uncertainty that the markets are facing, it is difficult to predict whether their predictions will change significantly,” highlights Harvey Bradley, Co-Head of Global Rates of Insight investmentreferring to the members of the FOMC, who “could now take into account an effective effective rate of duties compared to the past and, with the first Signals of inflation linked to the duties that begin to emerge, some could opt for a more prudent approach – especially considering that the Tensions in the Middle East They could further worsen the inflationary framework. It cannot be excluded that the forecasts are magazines to reflect only one cut of the rates this year “.
Rhetoric duties has attenuated but dollar is weak
“From the previous Fed meeting, in early May, the Trump administration has attenuated your rhetoric on the duties“, Underlines Michael Krautzberger, that is Public Markets of Allianz Global Investorsexplaining that “the equity and credit markets reacted by completely recovering the initial losses suffered after the ‘day of liberation’, and the financial conditions have loosened, reflecting the perception of the market according to which the tariff policy will be attenuated enough not to significantly compromise the fundamentals “.
On this basis the analyst believes “it is likely that the Fed maintains an attitude of waiting and observationcontinuing to evaluate the impact of duties on economic activity “.” We believe that the current macroeconomic context and monetary policy – says – favors an irreplacement of the curve of US returns. In currency markets, we think that the US dollar is facing contrary winds of a structural nature, which favors our short position on the dollar in the wallets “.
Data-dependent approach and policy autonomy
For Filippo Diodovich, Senior Market Strategist of IG Italia, “the absence of an inflationary acceleration linked to the duties suggests that the impact of commercial policies could be less marked than expected, even if the Fed will continue to carefully monitor any future prices on prices “.
Hence the probability that the Fed “confirm the current level of rates, reaffirming his own “Data-dependent” approach. This allows a greater flexibility In responding to changes in the economic context, avoiding rigid commitments that could prove inappropriate. Powell should also emphasize the importance of a cautious attitude and theindependence from political pressure who push for premature cuts “.
