By supplychainreport
WASHINGTON, United States – The US Federal Reserve is anticipated to continue its pause on interest rate cuts during this week’s policy meeting, as policymakers await more clarity on recent trade developments and their broader economic impact.
Recent adjustments to import tariffs on various goods—including 10% baseline levies on a broad range of items and 25% duties on products such as steel, automobiles, and aluminum—have prompted concerns about short-term inflationary pressures and a potential slowdown in economic growth. Some higher duties have been temporarily paused until July to allow time for negotiations with key trade partners.
Fed Chair Jerome Powell and other central bank officials have indicated that inflation control remains a primary objective. Loretta Mester, former President of the Cleveland Fed, emphasized that allowing inflation to rebound could undermine the progress made in recent years. “The Fed has to be very focused on maintaining inflation so that it doesn’t start moving back up in a more persistent way,” Mester said.
The Fed has kept its benchmark interest rate steady between 4.25% and 4.50% since December, aiming to guide inflation back toward its 2% long-term target while maintaining employment levels. While inflation data remains generally aligned with these targets, recent consumer sentiment surveys suggest growing concern over economic stability and rising prices.
In an interview, former St. Louis Fed President Jim Bullard, now dean at Purdue University’s Daniels School of Business, noted that holding rates steady remains a prudent choice amid current uncertainties. “I think the committee remains in good condition here, and most likely they’ll remain on hold at this meeting,” Bullard said.
Financial markets largely expect the Fed to reaffirm its rate pause this Wednesday. Stronger-than-expected labor market data for April has further eased pressure on the central bank to lower rates imminently.
Several financial institutions, including Goldman Sachs and Barclays, have revised their forecasts, now predicting potential rate cuts in late July. This delay would allow policymakers to assess additional economic data and developments in fiscal and trade policy.
However, some analysts suggest that any monetary easing could come later, depending on how inflation trends evolve in response to tariff impacts. Gregory Daco, Chief Economist at EY, cautioned that if inflation pressures become embedded, the Fed may adopt a slower approach to any future rate reductions.
While survey-based inflation expectations have increased, market-based measures remain close to the central bank’s 2% goal, supporting the current wait-and-see strategy. “This is a moment where you might want to look through the survey-based measures,” Bullard said, noting they may reflect broader concerns beyond inflation itself.
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