#FOMCMeeting

While another interest rate pause looks like a foregone conclusion at this week’s Federal Reserve policy-setting meeting, the path forward is anybody’s guess. In the bond market, traders are betting that the Fed will lower interest rates in July. However, given the significant unknowns in the economic outlook resulting from President Donald Trump’s trade wars, the timing of interest rate cuts (if there are any this year at all) could change dramatically in the months ahead.

It’s an extremely unusual moment for the US and global economy. Since Fed officials last convened, there’s been a seismic shift in the outlook. Markets shuddered after Trump announced sweeping “reciprocal” tariffs on US trading partners on April 2. Economists generally agree that tariffs will impact the economy, though the scale of these effects will heavily depend on whether the announced rates are reduced. But forecasters say that even lower tariffs than what Trump has threatened will slow growth and raise inflation.

Such impacts will come as growth was already set to slow in the years after the pandemic rebound. But unlike during during the pandemic, analysts don’t expect the Fed to rush to slash rates. Inflation is higher than central bankers would like, and the impact of the tariffs is still highly uncertain, with trade negotiations ongoing and a 90-day pause on many levies still in effect.