📉 1. Interest Rate Decision: Fourth consecutive pause on rate cuts
Maintained interest rates: The federal funds rate target range remains at 4.25%-4.50% (having maintained this stance for four consecutive meetings since December 2024).
Voting results: All members unanimously approved the resolution, with the addition of Kansas City Fed President Schmid voting (replacing Kashkari), no objections.
📖 2. Key Changes in Policy Statement
Economic uncertainty lessens: Revised the statement from 'economic outlook uncertainty has further increased in May' to 'uncertainty has decreased, but remains high'.
Removed risk warning: Removed the statement that 'risks of rising unemployment and inflation have increased', suggesting short-term pressures have eased.
Labor market adjustment: Described the unemployment rate as 'stabilized at a low level' changed to 'maintained at a low level', acknowledging marginal changes but overall strength.
📊 3. Economic Forecast and Dot Plot Signals
Increased risk of stagflation:
GDP growth rate: 2025 forecast revised down from 1.7% to 1.4% (2026 also revised down to 1.6%).
Inflation expectations: Core PCE inflation rate raised from 2.8% to 3.1%, due to tariffs pushing up prices.
Unemployment rate: 2025 forecast increased to 4.5% (0.1 percentage points higher than March's forecast)
Dot plot divergence widens:
2025 rate cut expectations: The median still maintains two rate cuts (50 basis points), but the number of officials supporting no rate cuts increased to 7 (from 4 in March), while support for two rate cuts decreased to 8.
Long-term interest rate path: Rate cuts in 2026 are expected to narrow to 25 basis points (previously expected 50 basis points), with terminal rate expectations raised.
💬 4. Powell's Press Conference Highlights
Policy stance: Emphasized 'being in a favorable wait-and-see position', requiring more data to confirm easing inflation, **rate cuts require 'confidence that inflation is persistently declining'**.
Tariff impact:
Clarified that 'tariffs will push up prices and suppress economic activity', and the impact is 'very difficult to predict', with consumers bearing some of the costs.
Current inflation has been 'initially affected', and may further manifest in the summer.
Labor market: Noted the phenomenon of 'low hiring, low firing', with no signals from the labor market indicating a rate cut.
Response to Trump: Refused to comment on the president's criticism, reaffirming that 'the Fed only focuses on employment and inflation targets'.
🏛️ 5. Trump's Pressure and Market Reaction
Pre-meeting attacks: Trump called Powell 'stupid' and 'political', complained that rate cuts were too late, even suggesting that 'he should personally lead the Fed'.
Market volatility:
U.S. stocks: The three major indices were mixed (Dow down 0.1%, Nasdaq up 0.13%).
Gold: Spot gold price fell 0.61% to $3367 per ounce, as rate cut expectations cooled.
Dollar: The dollar index rose slightly by 0.09%.
This meeting showed the Fed's adherence to a 'data-dependent' path amid stagflation risks, despite maintaining guidance for two rate cuts this year, internal hawkish voices have strengthened, and vigilance regarding tariff transmission has significantly increased, potentially further limiting future policy flexibility.
