Wait-and-See, and See Some More
Laura: So what did the Fed do at this meeting?
Will: They did what they’ve mastered over the past few months nothing. Rates were held steady for the third straight meeting at 4.25-4.50%, and the decision was unanimous. If this meeting were a movie, it would be titled ‘No Sudden Moves 3: Patience Strikes Back’.
Laura: Anything surprising in the statement?
Will: Yes and no. The biggest change? A subtle new phrase noting that risks to both inflation and employment have risen. It is the Feds way of saying, ‘We’re nervous, but not ready to act.’ Sort of like checking your bank account but not opening the actual statement.
Laura: What was Powells vibe at the press conference?
Will: Somewhere between Zen monk and dad at a soccer game yelling ‘good hustle’ but never actually coaching. His main message: ‘We’re in a good place to wait and see.’ He said ‘wait’ so many times it may qualify as the new Fed policy tool.
Laura: Did we learn anything new about future rate cuts?
Will: Not really. Powell didn’t so much drop hints as evade them entirely. He essentially said, ‘We don’t know what we are going to do until we know what happens.’ The market sees that as ‘no cut in June’ and that’s where we are priced.
Laura: Any fun metaphors this time?
Will: Powell didn’t offer one, but we’ll stick with our favorite: the Fed as a goalkeeper, staying in ready position. The economic penalty kick is coming eventually maybe and the Feds just bouncing on their toes, waiting to dive. Right now, though, they are still hugging the near post.
Laura: What’s really keeping the Fed on the sidelines?
Will: Tariffs. Big ones. Messy ones. Unpredictable ones. They are the elephant in the room, and Powell made clear that until we know where trade policy is headed and how it affects inflation and jobs the Feds not making a move.
Laura: What’s the risk of waiting too long?
Will: Think of the Fed like someone refusing to call the plumber even though the faucets leaking and the basement is suspiciously damp. They might be right to wait or they might end up dealing with a full-on flood.
Laura: What’s your forecast?
Will: Our Economics team still expect the first cut in June, followed by September and December, a total of three cuts in 2025.
Laura: But you just said the market had no cut in June?
Will: Yes, I know, seems silly, right? But the market moves fast and things can change quickly so we will hold the line… for now.