Wait and see

Jerome Powell delivered his semiannual report to the House Financial Services Committee, outlining the Fed’s stance on monetary policy and the economy. Once again, he laid out his wait-and-see approach to interest rate changes, emphasizing that it’s premature to cut rates, as policy changes and their economic impacts remain uncertain. Although probably not intended, this is gasoline to the president’s fire, which has been publicly pressuring Powell to cut rates. And as Powell’s term is set to expire next May, two Fed voting members are starting to position themselves as candidates to be the next Fed chairman, with a more dovish, Trump pleasing approach. The takeaway? The odds for a cut in July are still low, as you can see in the chart below; we might get a more vocal disagreement among FOMC voting members, but the decision on rates rests on Powell, and he’s been consistently clear about his position on rates. Tariffs and wars can delay or accelerate rate cuts, but at this point, there is no change in the horizon.

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