MNI Fed Review - May 2025: Firmly In Wait And See Mode

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• The FOMC held its Fed Funds target range at 4.25-4.50% as unanimously expected, with zero dissents.
• Net market reaction to the combination of the FOMC statement and Fed Chair Powell’s press conference was minimal, consolidating a hawkish readjustment seen primarily on last Thursday’s ISM manufacturing surveys and Friday’s payrolls report.
• The overwhelming message was that the Fed is in no hurry to cut rates whilst assessing solid hard data vs weak consumption indicators in particular.
• Soft data will be important but more weight appears to be placed on hard data, where deterioration can take longer to materialize.
• Indeed, Fed Funds futures priced just 6bp for the next meeting in June and 22bp of cuts for July as the press conference wrapped up vs 7bp and 23bp prior.
• Two of the most dovish analysts have tweaked, or will shortly tweak, their rate path views.