Fed: choosing not to choose

A month after the announcement of the "reciprocal" trade tariffs sparked panic on the markets, financial conditions have eased. The 90-day postponement of these tariffs, as well as various other exemptions, and the trade negotiations with several countries suggest that the tariff war is in a de-escalation phase. The US economy may not suffer too much. Meanwhile, the rates markets are anticipating that the Fed will cut rates in June and three more times in H2 2025 due to a high risk of recession. These two views cannot be right at the same time. Either the shock is modest or it is brutal. The Fed must choose... But for the moment choose not to choose.