MNI Fed Preview-May 2025: When In Doubt, Wait It Out

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EXECUTIVE SUMMARY: 

• The FOMC will extend its series of rate holds to a third meeting in May, keeping the Fed funds target rate at 4.25-4.50% while maintaining its forward guidance in the Statement.
• It has been an eventful six weeks since the prior decision which included escalation and subsequent partial backtracking in US tariff policy, and the impact of uncertainty on economic sentiment (if not yet the “hard” data).
• As the FOMC awaits clarity in both government policy and the data on the degree to which one if not both dual mandate targets will be missed, most participants will continue to support a holding pattern until there is a clearer signal to act.
• A cut doesn’t look a likely prospect until July at least. Barring some unexpected developments, we would think that the median Committee member is only looking to cut later in the year, perhaps not before September.
• At the press conference, Chair Powell is likely to warn about the risks to both sides of the dual mandate, while saying something along the lines of  "For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance. We continue to analyze the incoming data, the evolving outlook, and the balance of risks."
• We don’t anticipate any meaningful changes in the Statement, though any signal that the Fed is looking seriously at “soft” survey data to assess the outlook could be significant.