Markets Eye Powell’s Tone, Not Rate Hike, at May Fed Meeting
Investors await signals on inflation, tariffs, and future policy as the Fed stays on hold. When the Federal Reserve wraps up its May 7–8 policy meeting, few expect any change to interest rates.
The federal funds rate has held steady at 4.25%–4.50% since December. Futures markets put the odds of a May rate cut at just 3%.
But that’s not where the real focus lies.
All eyes are on Fed Chair Jerome Powell’s post-meeting remarks, where analysts hope for insight into the Fed’s thinking. The central bank faces a swirl of uncertainty: weak economic data, sticky inflation, and the growing impact of tariffs imposed by the Trump administration.
Powell Likely to Stay Cautious
“Chairman Powell is all but certain to express a wait-and-see attitude,” said Erik Weisman of MFS Investment Management. Analysts expect Powell to stress data dependence and avoid firm policy signals.
“The Fed is in a tough spot,” added Bill English, former senior Fed economist and Yale professor. Policymakers don’t know how tariffs will evolve—or how businesses and consumers will react.
That uncertainty complicates rate decisions. If inflation jumps due to tariffs, the Fed must decide whether to view it as temporary or take action.
Stagflation Fears Grow
Some economists warn that the economy may be slipping into stagflation—a mix of slowing growth and rising prices.
“Growth expectations are down, while inflation expectations are up,” said Torsten Slok, chief economist at Apollo. “That’s stagflation by definition.”
New data showed a 0.3% decline in GDP for Q1 and weak consumer spending. Meanwhile, the Fed’s preferred inflation gauge remained flat month to month.
Despite inflation concerns, CME FedWatch data shows a growing chance of a rate cut in June—now at around 31%.
Trade Policy Looms Over Fed’s Outlook
Tariffs remain a key unknown. The Fed must weigh whether to “look through” short-term price jumps or act preemptively. Some fear that inaction could backfire.
“A reactive Fed raises the risk of a deeper slowdown if trade tensions worsen,” warned Vincent Reinhart of BNY Investments.
Powell may also address recent market volatility. Treasury yields spiked in April but have since stabilized. If Powell mentions market resilience, it could reassure investors about liquidity and financial conditions.
Kosta Gushterov
Reporter at Coindoo
Kosta has been a part of the team since 2021 and has solidified his position with a thirst for knowledge, incredible dedication to his work and a “detective-like” mindset. He not only covers a wide range of trending topics, he also creates reviews, PR articles and educational content. His work has also been referenced by other news outlets.
