PT Solid Gold Berjangka | Fed stands pat, but sees higher inflation and growth risks
ECONOMY SOLID GOLD BERJANGKA, SG BERJANGKA , SOLID GROUP, PT SGB , SGB
Solid Gold Berjangka | The Federal Reserve held interest rates steady on Wednesday but said the risks of both higher inflation and unemployment had risen, further clouding the economic outlook as the U.S. central bank grapples with the impact of Trump administration tariff policies.
The economy overall has “continued to expand at a solid pace,” the Federal Open Market Committee said in a policy statement, attributing a drop in first-quarter output to record imports as businesses and households rushed to front-run new import taxes. The labor market remained “solid” and inflation was still “somewhat elevated,” it said.
The direction of policy will depend on which of those risks develop, or, in the more difficult outcome, whether inflation and unemployment increase together and force the Fed to choose which risk is more important to try to offset with monetary policy.
At a press conference after the announcement, Fed Chair Jerome Powell said there was no need to be in a hurry to change policy and the decision was clear to wait and watch data for any impact from tariffs.
Given continued worries around tariffs and how they could affect U.S. growth and inflation, the Fed is following a widely expected, “wait & see” approach on rates. We believe the next likely window for the Fed to lower rates won’t be until September or possibly later. The Fed itself expects to make only two rate cuts this year versus the market’s expectation of three.”
“The interest rate market currently expects the Fed will cut rates to around 3.6% by the end of 2025. A lot will depend on how the inflation versus growth tradeoff develops. Growth is likely to continue weakening, and the Fed would ideally want to cut rates to support growth – though over the shorter term, higher prices could make that tricky.”
“Despite performative opinions from powerful D.C. figures in the weeks leading up to today’s FOMC meeting, expectations for further easing remained low. However, with mixed economic data and warnings of higher inflation and unemployment in today’s statement, the stakes are high for the Fed’s messaging strategy this summer.
“While Powell and his colleagues may find some reassurance in recent labor market data, the threat of further tariff fallout remains a real risk that could compel them to act in coming meetings. On the macro front, we believe a key consideration will be whether hard data begins to confirm weakened consumer sentiment, or if, much like we saw in 2022, consumer resiliency continues to prevail. If the 2018 tariff negotiations offer any insight, a less hawkish, more accommodative Fed may be necessary to lift the market and economy out of any potential tariff related malaise.
Source: Investing.com