As Fed officials say holdings extending interest rates, investors and economists will be chairing Jerome Powell this week to understand clues that could ultimately drive central banks to take action and when.
The fourth consecutive meeting without cuts will lead to another meetingA long discussionFrom President Donald Trump. But policymakers are clear: Before they take action, they need the White House to address the big question marks about tariffs, immigration and taxation. Israel’sAttack on IraniansNuclear sites also introduce another uncertainty in the global economy.
Meanwhile, the U.S. economy is usually healthy even if it cools down, and there is little expectation rate that will move quickly. According to the pricing of futures contracts, investors bet that central banks would not reduce borrowing costs until September.
“The safest way in this case is to sit in your hands, which is the urgency to lower the rates,” said Seema Shah, chief global strategist at major asset management.
Policymakers gathered from June 17 to 18. They will make a statement at 2:00 p.m. Washington time, with Powell planning to extract reporters’ questions in 30 minutes.
A difficult choice
The president’s tariffs are generally expected to increase prices and growth rates, which are risks officials marked after the last meetingstatement. This could ultimately force the Fed to make difficult choices as the economy moves them in the opposite direction.
“I don’t think there’s anything to be shocked right now,” said David Hoag, fixed income portfolio manager at Capital Group. “But the longer the uncertainty we have for consumers, the more I pay attention to the fundamentals of the economy in terms of the companies on the planning side.”
But so far, the economy has not flashed warning signs, which will prompt the Fed to intervene.
Even if job growth slowed, the unemployment rate stabilized for three months, partly becauseSharp declineAmong immigration, the supply of workers is also being reduced. The longer the unemployment rate remains stable, the longer the Fed can maintain its speed to prevent potentially higher inflation.
However, there are few concerns about price data. Basic inflation rate risesLess than expectedThe fourth consecutive month is May. The Treasury rose in the news last week, with bets backing this year with more than one tax cut. The yield on the two-year notes is most sensitive to Fed’s policy, down more than seven basis points this week to 3.96%.
Still, officials may wait for other months of data to see how much tariffs are passed to consumers.Israeli air strikesIran will raise other questions. Federal Reserve officials have traditionally seen through energy price movements, but oil price shocks may affect inflation expectations.
New predictions
New economic forecasts and this week’s forecast rate can provide useful guidance for officials’ mindsets. They will be the first news since Trump’s “Liberation Day” to announce tariffs on April 2.
When analysts think about results, the range of possibilities is unusually large.
Shah said if officials predict that this year’s unemployment rate will be above 4.4% forecast in March, it would suggest that policymakers may lower interest rates by the fourth quarter.
Some Fed officials, including Gov. Christopher Waller, have shown open cuts because they believe policymakers can view the expected impact of tariffs on consumer prices as temporary — as long as inflation expectations remain. This is consistent with market-based measures, suggesting that traders also believe that the tariff price reduction will be short-lived.
But if officials raise expectations for inflation, this could reduce the number of cuts they projected this year to both in March, which could reduce the number of cuts for both. German Bank. Strategist in Barclays Warned in notes to clients that this “hawkish” surprise.
Officials may also take into account the substantial uncertainty of the final situation of Trump’s policy, but simply keep their predictions unchanged.
“I would be surprised if these points move too much,” said Zachary Griffith, head of investment grade and macroeconomic strategy at Creditsights. “It has been a roller coaster journey” since the Fed last released its forecast in March. “On the Internet, I think our situation may be a bit similar,” he said.
Late support
Some economists say the timing of the Fed’s next move will eventually come down to how long it will take for Trump’s policies to appear in economic data and concerns about the downturn.
In a survey by Bloomberg economists conducted on June 6-11, 42% of respondents predicted that the Fed would remain stable until specific weakness in the economy is more specific.
Julia Coronado, founder of Macropolicy’s perspectives and former Fed economist said she expects to cut interest rates starting in October or December in response to her estimates that she estimates will drop.
This story was originally fortune.com
