In recent days, several Federal Reserve officials have signaled a more cautious, wait-and-see approach—leading markets to believe that interest rate changes are unlikely in the near term. New York Fed President John Williams noted that the Fed needs “a few more months” of data before it can confidently assess the economic outlook, especially as uncertainties around inflation and trade policy continue to cloud the picture. As a result, the chances of rates staying unchanged through the summer have risen.
Williams pointed out that current economic indicators are delivering mixed messages. The Fed likely won’t have a clearer picture until after June or July, when more data on inflation trends, labor market strength, and the real-world effects of recent trade policies become available. In particular, he flagged the Trump administration’s new tariffs as a key variable—potentially affecting corporate investment plans and household spending, adding complexity to policymaking.
Similarly, Atlanta Fed President Raphael Bostic echoed those concerns. He warned that if U.S.–China trade talks make little progress, the Fed will need “several more months” to fully understand how tariffs are affecting prices and supply chains. Bostic also cautioned against cutting rates too soon, which could reignite inflation. For now, he expects only one rate cut in 2024.
Looking ahead, the Fed’s next meetings are scheduled for June, July, and September. Based on current signals from policymakers, unless a sharp downturn occurs, September could mark the earliest point for the first rate cut. Markets are increasingly aligning with that view—rate futures now imply a more than 60% chance the Fed will start easing in September.
While inflation has moderated in recent months—April’s Consumer Price Index (CPI) showed annual growth close to the Fed’s 2% target—demand-side figures like manufacturing and retail sales have been uneven. Analysts suggest that the Fed’s formerly “data-driven” stance is evolving into a more “policy-sensitive” approach, especially as global trade tensions weigh more heavily on both firms and consumers.
With uncertainty lingering, many experts believe the Fed is keeping rates high to preserve its ability to respond if downside risks materialize. But that strategy isn’t without cost—it raises the risk of a hard landing. If businesses pass tariff costs onto consumers, that could erode spending power and hurt economic growth. The specter of stagflation—slow growth and persistent inflation—is not off the table.
In this shifting macro environment, both markets and businesses would do well to stay vigilant and watch the Fed’s next move carefully.
