FOMC Preview: Waiting on the world to change

In its upcoming meeting, the Federal Open Markets Committee (FOMC) will hold rates steady for the third straight meeting at an upper bound of 4.5%. Despite the growth contraction in Q1, the solid but slowing labor market, and considerable angst about policy uncertainty (not to mention pressure from President Trump and his advisors), the Fed will continue to signal a “wait and see mode” until the ramifications of tariff policy become clearer. 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 assess if tariffs have a more persistent passthrough to inflation expectations.