The Federal Reserve System of the USA is holding its two-day policy meeting today and tomorrow, May 6-7, 2025. Markets widely expect the Fed to maintain its benchmark interest rate within the range of 4.25% to 4.50%, a level that has remained unchanged since December 2024.

Key Events Ahead of the Meeting

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

Inflation and Employment: The Fed faces a political dilemma as tariffs may simultaneously raise prices and suppress employment, jeopardizing its dual mandate of price stability and maximum employment.

Market Expectations: Investors are closely watching for any signals from Fed Chair Jerome Powell during his press conference following the meeting. While immediate rate cuts are unlikely, markets are pricing in possible cuts starting in July or December.