๐ Key Highlights:
1. No Change in Interest Rates
The Fed decided to keep interest rates unchanged in May 2025, maintaining a cautious stance amid ongoing economic uncertainty, including inflation and labor market conditions.
2. Economic Outlook Updated
Growth forecasts for 2025 were slightly reduced, while inflation projections increased. This shows the Fed's concern over persistent price pressures.
3. Balance Sheet Adjustment
The Fed will slow down the pace of Treasury securities runoff โ from $25 billion to just $5 billion per month โ to support market liquidity.
4. Rate Cuts Expected Later in 2025
Analysts now predict a potential rate cut in July 2025 if inflation eases and economic momentum slows down further.
5. Political Pressure Continues
Former President Trump criticized Chair Jerome Powell, urging immediate rate cuts. However, the Fed emphasized its independence and long-term strategy.
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๐ Market Reaction:
The S&P 500 experienced slight declines following the announcement, signaling investor anxiety about the Fed's cautious tone.
Bond yields remained volatile, reflecting uncertainty over future policy moves.
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๐ง Fedโs Dual Mandate:
The Federal Reserve aims to ensure:
1. Stable prices (control inflation)
2. Maximum employment
This meeting reflects the challenge of balancing both goals without derailing economic recovery.
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๐ฎ Whatโs Next?
June 2025: Unlikely to see a rate cut.
July 2025: Growing possibility of a small cut if inflation cools.
All eyes are now on the next FOMC press conference and upcoming CPI data.