Tonight, all eyes will be on Federal Reserve Chairman Powell. He will attend the Chicago Economic Club event and deliver a speech at 1:30 a.m. Beijing time on April 17. Global investors, analysts, and market participants are waiting for Powell to respond to a series of recent economic developments.
Interestingly, the venue of Powell's speech was the place where Trump visited in October 2024 and talked about high tariffs and the replacement of the Federal Reserve chairman. Although the United States temporarily suspended tariffs on more than 75 countries around the world for 90 days, the overall economic outlook is still full of uncertainty, and market concerns about a US recession are heating up.
Powell's speech today is bound to provide important clues about the current state of the economy, the impact of tariffs, and the trend of interest rates in 2025. The market will focus on three suspense:
Faced with Trump’s tariff policy and the pressure of “changing leadership” in the White House, how will the Federal Reserve stick to its tradition of independent decision-making?
Against the backdrop of falling inflation but increasing recession risks, will Powell's expectations for rate cuts change?
The "hawk-dove dispute" within the Federal Reserve is becoming increasingly fierce. Will the radical interest rate cut advocacy of officials such as Waller affect decision-making?
In a previous speech, Powell said that Trump's tariff increase far exceeded the Fed's expectations and the impact on the economy may be greater than expected. Therefore, he believes that the recent policy impact is highly uncertain and will wait for clearer conditions before further adjustments. He also emphasized that the current policy stance is good and a wait-and-see attitude can be adopted, and the policy is still moderately restrictive. As for whether the US economy will experience a recession, he pointed out that the Fed has not made a probabilistic forecast for the possibility of a recession, but external forecasting agencies have increased the possibility. In terms of interest rate cut expectations, Powell did not change his views at the March meeting, believing that weak economic growth and rising inflation offset each other, which will allow the Fed to maintain its expectation of two interest rate cuts in 2025. However, Trump's tariff policy not only increases the risk of the United States falling into recession, but may also force the Fed to introduce more and more aggressive interest rate cuts. At the same time, market performance remains sluggish, reflecting that the previous vision of the Fed's policy shift to easing has failed to translate into a substantial rebound. Investors have chosen to wait and see and become cautious.
The Fed has kept interest rates in the 4.25%-4.5% range since the beginning of 2025. The market currently expects the Fed to cut interest rates three times in 2025, with the first one starting in June. According to the CME "Fed Watch Tool" on April 16, the probability of the Fed keeping interest rates unchanged in May is 81.4%, and the probability of a 25 basis point rate cut in June is 60.1%.
In addition, several investment banks have recently increased their expectations for the Fed to cut interest rates this year. The latest to make changes is Deutsche Bank, which now expects the Fed to cut interest rates by 25 basis points in December. Previously, it expected no rate cuts in 2025. It also expects the Fed to cut interest rates by 25 basis points twice in the first quarter of 2026, bringing the terminal interest rate to 3.5%-3.75%. $BTC