The Federal Reserve does not indeed believe that a recession will occur
Hard to grasp for 5 seconds, simplified understanding: The Federal Reserve believes the economy will not recession.
PhyrexNi
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As expected, Japan did not adjust interest rates in March. Secondly, Nick's recent comments almost represent the Federal Reserve's views at this moment. The Federal Reserve does not plan to start cutting interest rates within six months, that is, before the end of the third quarter (September). This reveals three implications:
1. The Federal Reserve indeed does not believe a recession will occur. Therefore, it maintains a high interest rate state to reduce inflation through interest rate adjustments.
2. The Federal Reserve has considered the possibility of a recession, but due to Trump's tariff policy, tariffs may increase inflation, so the Federal Reserve needs to observe more data before making decisions.
3. The probability of cutting interest rates three times in 2025 will be very low; in the fourth quarter, there are only two regular meetings in November and December, making the probability of two consecutive rate cuts quite high.
Overall, this is a relatively hawkish approach. The market believes that the first interest rate cut in June is basically off the table unless a black swan event occurs; otherwise, the Federal Reserve should not adjust interest rates. The key point is that the Federal Reserve has not expressed a stance on balance sheet reduction, which is still worth expecting.
1. The Federal Reserve indeed does not believe a recession will occur. Therefore, it maintains a high interest rate state to reduce inflation through interest rate adjustments.
2. The Federal Reserve has considered the possibility of a recession, but due to Trump's tariff policy, tariffs may increase inflation, so the Federal Reserve needs to observe more data before making decisions.
3. The probability of cutting interest rates three times in 2025 will be very low; in the fourth quarter, there are only two regular meetings in November and December, making the probability of two consecutive rate cuts quite high.
Overall, this is a relatively hawkish approach. The market believes that the first interest rate cut in June is basically off the table unless a black swan event occurs; otherwise, the Federal Reserve should not adjust interest rates. The key point is that the Federal Reserve has not expressed a stance on balance sheet reduction, which is still worth expecting.
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