Looking For Another Interest Rate Cut? See You In December

Published: Thursday, May 29, 2025 at 4:43 am

Fed Likely to Hold Steady on Interest Rates Until December, Minutes Reveal

The Federal Reserve is signaling a "wait-and-see" approach to interest rate cuts, according to the recently released minutes from the early May Federal Open Market Committee (FOMC) meeting. These minutes suggest that those hoping for a rate cut in the near future may need to adjust their expectations and look towards the end of the year.

The FOMC, the part of the Fed responsible for setting interest rates, is navigating a complex economic landscape. Market participants, including major investment decision-makers, are interpreting recent trade policy changes as a potential negative supply shock. This could restrain domestic activity compared to foreign activity.

The Fed, led by Chair Jerome Powell, faces the challenge of balancing its dual mandates: maintaining stable prices and maximum sustainable employment. The traditional approach involves raising rates to curb inflation (when the economy is "overheated") and lowering rates to stimulate employment (when it's falling). However, the Fed's tools are limited, and they don't have the ability to achieve both simultaneously.

The minutes highlight the uncertainty surrounding the economic outlook. The Fed is relying on economic data, which often lags behind current events and can be indecisive. They are currently waiting for clearer patterns in inflation and economic activity before making any decisions. The FOMC agreed that with economic growth and the labor market still solid, and current monetary policy moderately restrictive, they are well-positioned to wait.

Oxford Economics echoed this sentiment, stating that the May meeting reinforced the Fed's cautious approach. They, like everyone else, are uncertain about the administration's future actions and their impact on the economy. The coming months are expected to be challenging, with economic signals fluctuating.

BNN's Perspective: The Fed's cautious stance is understandable given the current economic volatility. While the uncertainty surrounding trade policy and global events makes predicting the future difficult, the Fed's measured approach is a responsible one. It's a balancing act, and waiting for more clarity before making significant policy changes is a prudent move.

Keywords: Federal Reserve, FOMC, interest rates, rate cuts, Jerome Powell, inflation, employment, economic outlook, trade policy, economic data, monetary policy, wait-and-see, economic growth, labor market, Oxford Economics, market participants, negative supply shock, stable prices, maximum sustainable employment.

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