Here are a few interpretations of the Fed’s decision to hold rates steady and chairman Jerome Powell’s comments.
Seema Shah, chief global strategist of Principal Asset Management: “The Fed has been plunged into an almost impossible situation whereby its two mandates will likely move in opposite directions, but government policy – which is incredibly uncertain itself – will dictate both the timing and magnitudes of those moves.
“Certainly, the recent Trump headline suggesting an already hardline approach to China tariff negotiations further reinforces the uncomfortable position for the Fed. In this situation, what else can the Fed do but sit on its hands? Rate cuts will be required but, increasingly, it seems that the Fed will need to wait until late Q3 before the window of opportunity opens.”
Ryan Sweet, chief US economist at Oxford Economics: “Generally, Powell emphasised that the Fed is in a mode of wait, see, and watch. This is generally consistent with our view that the Fed will be reactive versus pre-emptive when it comes to rate cuts. Powell pushed back on that past Fed responses to growth scares as a guidepost for today, given that inflation is above target now versus during growth scares when it is generally below target.”
Samuel Tombs, chief US economist at Pantheon Macroeconomics: “Ultimately, we look for 25bp easings in July, September and December, as the tariff uplift to inflation remains narrowly confined to goods prices, with little spillover to services prices, and the labour market weakens at a faster pace. But the FOMC remains nervous of repeating the high inflation mistake of 2022-to-23, suggesting the risks our forecasts are skewed towards less and later easing.”
Goldman Sachs on the tariff impact outlook: “Taken together with our tariff assumptions, we expect monthly core PCE inflation to accelerate over the next couple of months to an average of 0.36 per cent month-over-month in May-August. Our monthly forecast path corresponds to an increase in the year-over-year rate from 2.6 per cent in March to 3.8 per cent in December 2025. We expect year-over-year core PCE inflation to remain above target in 2026 (2.7 per cent in December 2026), as we expect higher imported input costs to continue to pass through to consumer prices into early next year.”
