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What will be needed for the Fed to adopt a more flexible stance? Macquarie thinks

Author: Scott Kanowsky

Economy

Published 19.04.2025, 10:30

Investing.com "The Federal Reserve may need to see signs of instability in the U.S. private credit market before entering a state of 'fear' that could prompt actions from the central bank, according to analysts from Macquarie.”

The Fed is waiting for greater clarity on the overall economic situation following the erratic tariff measures by U.S. President Donald Trump.

Fed Chairman Jerome Powell has stated that there has been a lot of "waiting and watching," even on the part of the Fed, in this context.

Powell added that this tactic seemed "the right thing to do in a time of high uncertainty," a statement that was interpreted as an indication that the central bank might not rush to cut interest rates if tariffs led to a broader economic crisis, an action known by many investors as a "Fed put," meaning an intervention by the Fed to rescue markets if prices fall too much.

Fed Governor Christopher Waller said earlier this month that, although tariffs represent a significant shock to the U.S. economy, he expects the levies to have a "transitory" effect on inflation.

In a note to clients, Macquarie strategists led by Thierry Wizman and Gareth Berry said that the Fed could adopt a more flexible monetary policy stance if more signs of problems emerged in the private credit market. "We would expect these cracks to appear first among highly leveraged markets, such as the leveraged loan market," they wrote.

Sincerely,

Econ. Romer A. Carrasco T.