At 2 a.m. Beijing time on May 8, the Federal Reserve will announce its interest rate decision. The market generally expects it to maintain the federal funds rate at 4.25% - 4.50%, with data from the Chicago Mercantile Exchange indicating a 97.6% probability of keeping rates unchanged.
U.S. economic data shows mixed performance, with first-quarter GDP shrinking at an annual rate of 0.3%, primarily due to an expanding trade deficit. However, April saw an addition of 177,000 jobs, surpassing expectations, while the unemployment rate remained stable at 4.2%.
Currently, the outlook for Federal Reserve policy is unclear. "Federal Reserve mouthpiece" Nick Timiraos pointed out that it faces a dilemma between maintaining rates to combat inflation and lowering rates to stimulate the economy. Federal Reserve officials have also emphasized the need for more supporting data, especially from the labor market, making immediate action unlikely.
At 2:30 a.m., Federal Reserve Chair Jerome Powell will hold a monetary policy press conference. Due to the impact of the trade war, Powell faces significant pressure to cut rates; however, based on his past style, he may find it difficult to provide clear policy signals this time. Wall Street expects he may hint that the impact of tariffs could lead to rising inflation and unemployment rates, and due to his strained relationship with Trump, he may adopt a cautious and reactive stance.
The market anticipates that the Federal Reserve's "pause on rate cuts" will not last long; LSEG data shows that there is nearly an 80% probability of resuming rate cuts in July, with three 25 basis point cuts possible throughout the year. Investors need to closely monitor this event and be wary of market volatility risks.