#FOMCMeeting

The Federal Open Market Committee (FOMC) is holding a two-day policy meeting today and tomorrow, May 6–7, 2025. The market widely expects that the Fed will maintain the benchmark interest rate in the current range of 4.25% to 4.50%, a level that has remained stable since December 2024.

Key Developments Ahead of the Meeting

Economic Outlook: Recent data presents a mixed picture. While GDP shrank by 0.3% in the last quarter, the labor market remains strong, with 177,000 jobs added in April. However, new tariffs introduced by President Trump have disrupted business sentiment and manufacturing activity, raising concerns about potential stagflation.

Inflation and Employment: The Fed faces a policy dilemma as tariffs can simultaneously drive up prices and suppress employment, challenging the dual mandate of price stability and maximum employment.

Market Expectations: Investors are looking for signals from Fed Chair Jerome Powell during the post-meeting press conference. Although an immediate rate cut is unlikely, the market predicts a possible reduction starting in July or December, depending on further economic data.

Market Reactions

Gold Prices: Gold has surged to over $3,300 per ounce, driven by demand as a safe-haven asset amid economic uncertainty and a weakening US dollar.

Bond Market: Bond investors are taking a cautious stance, maintaining a neutral position ahead of the Fed's decision, reflecting uncertainty about future interest rate movements.

Stock Market: US stock futures have fallen after nine days of gains for the S&P 500, as investors await the Fed's policy direction.

The FOMC policy statement is expected on Wednesday, May 7, at 2:00 PM ET, followed by a press conference with Chair Powell at 2:30 PM ET. Market participants will closely analyze this communication for insights into the future direction of Fed policy.