FOMC Preview: Fed will remain on hold until clarity emerges

In its upcoming meeting, the Federal Open Markets Committee (FOMC) will hold rates steady for the second straight meeting at an upper bound of 4.5%. Ambiguity about future policies will keep the Fed on the sidelines until either the labor market materially weakens or if inflation is sustainably and durably heading down to 2%. How and when trade and immigration policy is implemented is still a huge open question in the Trump administration. The potential varying magnitudes of policies and their wide range of impacts on inflation and growth is going to tip the balance towards inaction for the Fed, and Fed officials have maintained the need to wait and see if tariffs have a more persistent passthrough to inflation expectations.