$BTC The Federal Reserve’s FOMC is kicking off its two-day policy meeting today and will wrap up tomorrow, May 7, 2025. Most market watchers expect the Fed to keep interest rates unchanged in the current range of 4.25% to 4.50%, a level it’s held since December.

What’s Happening in the Economy

The latest economic data paints a mixed picture. The economy shrank by 0.3% last quarter, but the job market is still holding up—177,000 jobs were added in April. That said, new tariffs introduced by President Trump have shaken business confidence and hurt manufacturing, raising fears of stagflation (a mix of high inflation and weak growth).

The Fed’s Dilemma

These tariffs could push prices higher while also putting pressure on employment. That puts the Fed in a tough spot as it tries to balance its goals of keeping inflation under control and supporting job growth.

What Markets Are Watching For

Investors are closely watching Fed Chair Jerome Powell's press conference after the meeting. While a rate cut this week is unlikely, markets are betting on potential cuts in July or December—depending on how the economy holds up in the months ahead.