At the Federal Reserve's interest rate meeting on May 8, closely watched by the financial markets, the real concern is not that the Fed will not cut interest rates, but that Fed Chair Powell will no longer signal any expectations of easing. Historically, the Fed's interest rate cuts need to meet two key conditions. First, the rise in prices must be effectively controlled, and inflationary pressures must significantly ease. Only when inflation data returns to a reasonable range can the Fed have room to cut rates to avoid triggering a sharp rise in prices again. Second, the economy faces substantial recession risks; if no interest rate cuts are taken, it could lead to a systemic crisis. Cutting rates can stimulate economic recovery and prevent the economy from falling into a deep recession.
Based on current data, a rate cut in May is almost impossible. From the inflation data, although some inflation indicators have recently eased, they are still above the long-term target set by the Fed. At the same time, although there are signs of a slowdown in the U.S. economy, there has not yet been a substantial recession risk that would prompt the Fed to decisively cut rates. Additionally, the uncertainty surrounding tariff policies continues to disrupt the market. Adjustments to tariffs will affect corporate costs and consumer spending, subsequently impacting economic growth and inflation levels. This makes the Fed more cautious in its monetary policy decisions, and the window for rate cuts is unlikely to open in the short term.
It is noteworthy that Trump frequently pressures on social media, emphasizing that 'inflation has subsided, and the Fed should cut rates immediately.' The underlying motivation is that rate cuts can stimulate economic growth, lower corporate financing costs, promote corporate investment and expansion, and thus drive economic development; at the same time, rate cuts often push up the stock market, and investors are more willing to invest in the stock market due to lower funding costs, which undoubtedly enhances his political achievements and gains more support on the economic front.
