Fed Minutes Expected To Provide Clues On May Rate Hold Decision
The Federal Open Market Committee (FOMC) will release the Minutes of its May 6-7 meeting on Wednesday (5/28). At that time, policymakers decided to maintain the Fed Funds Target Range (FFTR) at 4.25%-4.50%, as widely anticipated by market participants.
The Federal Reserve (Fed) took a more aggressive stance earlier in the year, amid concerns about the potential impact of U.S. President Donald Trump’s tariffs on economic progress and inflation.
Officials not only decided to keep rates on hold, but they also gave no hints about future rate cuts, maintaining the wait-and-see stance they took in March.
Fed Concerned About Future Risks
Fed officials noted, “Uncertainty about the economic outlook has increased. The Committee is mindful of the risks to both sides of its dual mandate,” according to a statement released alongside the decision.
Later in the press conference, Chairman Jerome Powell said, “We are comfortable with our policy stance.” "We think right now, the right thing to do is wait and see how things develop. There's so much uncertainty," he added.
In addition, the Fed has slowed the pace of its reduction in securities holdings. The central bank has been letting up to $25 billion in Treasury bonds mature each month, and is tapering that reduction to just $5 billion starting in April. Shrinking its balance sheet is another tool the Fed is using to control inflationary pressures.
President Trump's massive tariffs have been a major reason behind the Fed's latest aggressive stance. While typically cautious, Chairman Powell finally acknowledged that tariffs are "a good part" of their rising expectations for higher inflation. He added that it would be "very difficult" to judge how much of the inflation is coming from tariffs.
"Looking ahead, the new Administration is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation. The net impact of these policy changes is what will matter for the economy and the direction of monetary policy," Powell said. (alg)
Source: FXstreet
