Can Trump fire Powell?
In addition to upending the global economy with his tariffs, President Donald Trump has introduced additional uncertainty for financial markets by undermining the independence of the Federal Reserve and Fed Chair Jerome Powell in a series of public attacks.
His behavior could render moot whatever the result of a pending Supreme Court review of a 90-year-old case that could answer the question, can Trump fire Powell?
Last week, President Trump called Chair Powell a "major loser" and suggested the Fed cut interest rates last September to help former President Joe Biden.
In Michigan on Tuesday to celebrate the first 100 days of his second administration, the president refreshed his assault.
"Interest rates came down despite the fact that I have a Fed person who's not really doing a good job but I won't say that, I want to be very nice," Trump told his rally crowd.
"I want to be very nice and respectful to the Fed," he continued. "You're not supposed to criticize the Fed, you're supposed to let him do his own thing.
"But," he concluded, "I know much more than he does about interest rates, believe me."
- David Dittman
David is the former managing editor and chief investment strategist of Utility Forecaster and the former editorial director of Investing Daily, Charles Street Research, and Weiss Ratings. A former stockbroker, David has been working in financial media for more than 20 years.
Q1 GDP unexpectedly declines
In its initial estimate of first-quarter gross domestic product (GDP), the Bureau of Economic Analysis said economic growth decreased at an annual rate of 0.3% as imports jumped 41.3%.
If this holds through to the third reading, it will mark the biggest drop in GDP since Q1 2022. Economists expected a 0.4% increase in economic growth.
"The economy weakened in the first quarter," says Bill Adams, chief economist for Comerica Bank. "Businesses and consumers pulled forward purchases to get ahead of tariffs in the first quarter, and throttled back spending and investment plans in other areas."
Adams notes, though, that today's reading doesn't tell us much about the current state of the economy, given all of the announcements and changes that have taken place since the start of the month.
The economist feels the uncertainty will keep the Fed on hold this month, but he says a June rate cut is on the table.
- Karee Venema
With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021, and oversees a wide range of investing coverage, including content focused on equities, fixed income, mutual funds, ETFs, macroeconomics and more.
The Fed is unlikely to cut interest rates this time
The Federal Reserve is not likely to change rates at its meeting next Wednesday, despite the modest contraction in first-quarter GDP.
Price and wage data through March have been encouraging, but the Fed is concerned that price increases caused by April tariffs may raise inflation expectations. There has been evidence in consumer sentiment surveys of exactly that.
If the economic contraction gets worse, the Fed could cut rates a quarter point at its June 18 meeting, or the one after that, on July 30.
However, that will be determined by how the Fed weighs the balance of risks between a slowing economy and rising inflation.
- David Payne
David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce.
How will the March PCE report impact the Fed's interest rate decision?
In March, both headline PCE and core PCE, which excludes volatile food and energy costs, were flat month over month, a slower pace than what was seen in February.
Year over year, headline PCE rose 2.3%, faster than the 2.1% increase economists expected. Core PCE also came in higher than anticipated, at 2.6%.
The data also showed a sharp uptick in consumer spending (+0.7% in March vs 0.1% in February).
"This inflation report, coupled with this morning's disappointing GDP figures, creates significant pressure on the Federal Reserve ahead of next week's crucial policy meeting," says David Hernandez, crypto investment specialist at 21Shares.
Hernandez adds that while markets have priced in no change to interest rates at the next Fed meeting, "today's mixed economic signals introduce fresh uncertainty into the equation."
According to CME FedWatch, futures traders are currently pricing in a 94% chance the FOMC holds rates steady next Wednesday. The odds for a June rate cut are at 60%.
- Karee Venema
What will the April jobs report say about the labor market?
The April jobs report will be released ahead of this Friday's open. It will give Federal Reserve officials the first glimpse of how Trump's retaliatory tariff announcement and reciprocal levies from several U.S. trade partners may impact the hard data.
"Hiring is often delayed when consumers are concerned about losing their jobs, or when businesses don’t know if there will be a positive return to investing in additional workers," writes David Payne in the Kiplinger jobs outlook.
In March, nonfarm payrolls rose by a robust 228,000, while February's jobs growth was upwardly revised.
This time around, Goldman Sachs economists believe the U.S. added a slightly above-consensus 130,000 new jobs in April, which they say reflects "a still-moderate pace of job creation."
The group also expects government payrolls to be unchanged, "as a likely decline in federal government positions offsets increases at the state and local levels.
And they say the unemployment rate stayed at 4.2%.
- Karee Venema
Fed officials signal support for a pause
Between the March and May Fed meetings, several Fed officials have signaled support for keeping the federal funds rate at its current range of 4.25% to 4.5%.
Speaking on April 23, Cleveland Fed President Beth Hammack said it is too soon to consider a rate cut in May, but the central bank could move later if there is clear and convincing evidence of a sharp labor market decline.
Hammack added that there remains a very high bar set for emergency rate cuts – the most recent occurred at the onset of the pandemic in March 2020 – and there is not enough of a market or economic breakdown at the moment to support one.
Meanwhile, on April 24, Fed Governor Christopher Waller said he doesn't expect the impact of tariffs to hit until July. However, Waller added that a significant decline in the labor market could encourage a rate cut sooner rather than later.
"To be sure, Fed officials have a strong consensus for not moving in the near term as the economic impact from tariffs is still unfolding and other aspects of the Administration's policies remain to be seen – namely, the upcoming tax bill being debated in Congress," write Deutsche Bank economists.
They anticipate the biggest impact from tariffs – higher inflation and lower growth – to occur in the back half of the year and do not believe the Fed will resume rate cuts until December.
- Karee Venema
Who votes on Fed rate cuts?
The Federal Open Market Committee (FOMC) – the Federal Reserve's policy-setting group – has 12 members, eight permanent and four who rotate each year.
The eight permanent voting committee members include the Fed chair and vice chair, the five Fed governors and the president of the New York Fed.
Four regional Fed presidents are rotated in each calendar year.
The 2025 FOMC voting committee consists of:
- Fed Chair Jerome Powell
- Vice Chair Philip Jefferson
- Fed Governor Michael Barr
- Fed Governor Michelle Bowman
- Fed Governor Lisa Cook
- Fed Governor Adriana Kugler
- Fed Governor Christopher Waller
- New York Fed President John Williams
- Boston Fed President Susan Collins
- Chicago Fed President Austan Goolsbee
- St. Louis Fed President Alberto Musalem
- Kansas City Fed President Jeffrey Schmid
In 2026, the presidents from Cleveland, Philadelphia, Dallas and Minneapolis will rotate in as FOMC voting members, according to the Federal Reserve.
- Karee Venema
Initial jobless claims are on the rise
The "price stability" part of the Federal Reserve's dual mandate is more front-of-mind for investors, traders and speculators as President Trump's tariffs begin to impact the global economy.
"Full employment" has been less of a concern, even amid slowed-down hiring and stagnating wage growth.
But the Department of Labor reported Thursday morning that initial jobless claims increased by 18,000 to 241,000 during the week ending April 26, well above a consensus estimate of 223,000.
"The Fed is far too sanguine on the labor market given the incoming data," writes Renaissance Macro Research Head of Economics Neil Dutta.
Initial claims for the prior week were revised from 222,000 to 223,000. The four-week moving average increased by 5,500 to 226,000. The previous week's average was revised up by 250 from 220,250 to 220,500.
Continuing claims increased to 1.916 million for the week ending April 19, their highest level since 2021.
According to Dutta, "The bigger story is that continuing claims keep rising roughly 5% year-over-year. As job finding rates remain low, spells of unemployment go up."
The "meaningful increase" in initial claims indicates "that continuing claims might be rising a bit more in the weeks ahead."
- David Dittman
The Bank of Japan cuts its growth forecast
On Thursday, the Bank of Japan (BOJ) cut its growth forecasts for this fiscal year, citing "extreme" uncertainty related to global trade policies.
The central bank now expects the Japanese economy to grow just 0.5% in the fiscal year ending March 31, 2026, down from 1.1% in January. It anticipates a slightly higher 0.7% growth rate for the following fiscal year.
The BOJ also kept interest rates unchanged at 0.5% for the second straight meeting.
Japan's officials are currently undergoing trade negotiations with the Trump administration, hoping to hash out a deal to lower tariffs on the country's exports of its auto and electronics parts.
"The series of tariffs must be reconsidered, as they are currently beginning to cause substantial damage to our nation's economy," said Ryosei Akazawa, Japan's economic minister, when he arrived in the U.S. earlier this week.
"We want to make as much progress as possible toward an agreement that fosters a win-win relationship," Akazawa added.
- Karee Venema
Treasury Secretary Bessent chimes in on rate cuts
Does the bond market agree with President Trump about rate cuts?
"Yes," according to Treasury Secretary Scott Bessent. "We are seeing that two-year rates are now below fed-funds rates," Bessent said Thursday morning on Fox Business. "So that’s a market signal that they think the Fed should be cutting."
Bessent had previously refrained from commenting on Federal Reserve policy.
As Nick Timiraos of The Wall Street Journal reports, "Two-year Treasury yields were below the Fed's short-term rate for all of 2023 and much of 2024."
The market saw the Fed engineering "a soft landing that brought inflation down without a recession," Timiraos explains, "or that inflation would fall and the Fed would cut rates because the economy fell into a recession."
Amid recent incoming data suggesting the economy is weakening, 30-day fed funds futures prices show expectations for as many as four and even five rate cuts this year.
The market sees a greater than 95% probability the Fed will hold next week. The FOMC will meet five more times in 2025 after the May meeting.
- David Dittman
Where are all the Fed speakers right now?
The Fed-speak is non-existent right now. That's by design. And, setting aside arguments about correlation vs causation, markets are behaving well in the silence.
Since Saturday, April 26, and until Thursday, May 8, participants in the FOMC meeting have been bound by a Federal Reserve policy that limits the extent they can talk about the economy and interest rates.
These two-week "blackout periods" begin the second Saturday preceding an FOMC meeting and end the Thursday following a meeting. An unofficial practice that began in the 1980s was formalized in 2011 and reaffirmed in January.
Fed-watchers see the policy as a measure against corruption and the potential for information leaks to distort markets. It also provides cover for open discussion during the Fed's most intense periods of policy-making.
During the current quiet period, the S&P 500 has rallied 2.0%, the Dow Jones Industrial Average 2.1% and the Nasdaq Composite 2.6%.
- David Dittman
April jobs report gives the Fed more wiggle room
The April jobs report came in stronger than expected, showing the U.S. labor market is slowing but still healthy. While this is good news for the Fed, which has repeatedly said it is in no rush to cut interest rates, the heightened uncertainty from President Trump's trade war has many pushing the central bank to act sooner rather than later.
According to the Bureau of Labor Statistics, nonfarm payrolls rose by 177,000 in April. This was lower than March's downwardly revised 185,000 figure but more than the 133,000 new jobs economists expected. February jobs growth was also lowered.
The unemployment rate, which is calculated from a separate survey, remained at 4.2%.
"Although markets had braced for a slowdown in job growth – due to factors like DOGE job cuts, increased immigration reform, and soft economic indicators – private sector hiring has remained resilient," said Kevin O'Neil, associate portfolio manager and senior research analyst for Brandywine Global.
O'Neil adds that while the stronger-than-expected employment data "gives the administration more breathing room in its trade negotiations," it also suggests that "the Federal Reserve is unlikely to shift its current policy stance in the near term."
Read more: Strong April Jobs Report Lowers Rate-Cut Hopes: What the Experts Are Saying
President Trump chimes in on rate cuts after the April jobs report
President Trump quickly took to Truth Social after this morning's release of the April jobs report, encouraging the Federal Reserve to cut interest rates as soon as possible.
In an early Friday post, he wrote:
"Gasoline just broke $1.98 a Gallon, lowest in years, groceries (and eggs!) down, energy down, mortgage rates down, employment strong, and much more good news, as Billions of Dollars pour in from Tariffs. Just like I said, and we're only in a TRANSITION STAGE, just getting started!!! Consumers have been waiting for years to see pricing come down. NO INFLATION, THE FED SHOULD LOWER ITS RATE!!! DJT"
- Karee Venema
What experts are saying about the jobs report and the Fed
Several of Wall Street's top minds are chiming in on what the April jobs report means for the Fed and interest rates. Here's a sampling of what they're saying:
"The jobs data for April are reassuring, but business and consumer surveys point to uncertainty ahead. They reflect a lot of concern about general economic conditions with higher tariffs," says Bill Adams, chief economist at Comerica Bank. "There are also some indicators that businesses are reining in plans for hiring and capital spending."
Adams adds that the hard data carries more weight in the Fed's decision-making than what they forecast might happen in the future, "and the job market was fine in April." As such, Adams expects the central bank to hold steady next week and will likely lower rates with less frequency going forward than many are anticipating.
"Like the U.S. economy, job growth is gradually weakening but remains strong enough to support consumer spending early in Q2 – as tariff-related price increases just begin to bite," says Jennifer Timmerman, investment strategy analyst at Wells Fargo Investment Institute (WFII). "Resilient labor-market conditions will likely keep the Fed on the sidelines until tariffs more clearly pressure economic growth."
"With the U.S. labor market conditions remaining intact, the Fed can remain a spectator on the sidelines with respect to policy changes as the fallout from Trump's higher tariff regime and shifting trading policy appears to be lagging," says Charlie Ripley, senior investment strategist for Allianz Investment Management. "Ultimately, this report is consistent with other labor metrics that conclude the U.S. economy is not experiencing a material shift in labor conditions."
- Karee Venema
Markets now expect a July rate cut
A strong April jobs report lowered the odds of a June rate cut and pushed expectations for one out to July.
According to CME FedWatch, futures traders are now pricing in a 34% chance the Federal Reserve will lower the federal funds rate by a quarter-percentage point in June, down from 55% one week ago and 61% one month ago.
The probability that the next rate cut will come in July rose to 56% from 44% on Thursday and 44% one month ago.
- Karee Venema
The S&P 500 is on a record-setting win streak ahead of Fed week
The S&P 500 gained 1.5% on Friday, May 2, to mark its ninth consecutive advance. This is the longest winning streak for the broad-market index since November 2024, according to Dow Jones Market Data.
And it's particularly notable given recent stock market volatility in reaction to tariff uncertainty. Indeed, the S&P 500 was down more than 15% for the year to date in mid-April. It has since pared this deficit to just 3.3%.
The rebound occurred "as progress on tariff talks helped calm investor fears," says Mark Hackett, chief market strategist at Nationwide, and was helped by steady retail buying and institutional investors coming off the sidelines.
"Investors' positive response to earnings suggests expectations were appropriately reset, but with emotions still elevated, volatility is likely to remain," Hackett adds.
Read more: Stock Market Today: S&P 500 Nabs Longest Win Streak Since 2004
Will the Bank of England cut rates on Thursday?
The upcoming week is a busy one for global central bankers. In addition to the U.S. Fed meeting, the Bank of England will issue its latest policy statement this Thursday, May 8.
Global central banks are easing monetary policy in the face of the Trump administration's trade war, says Jennifer Lee, senior economist at BMO Capital Markets.
"According to Bank of England Governor Andrew Bailey, there are a few things to consider: weak growth and what caused it (supply or demand), inflation, and now 'the trade issue is the new part of that story,'" she adds.
Lee notes that confidence is waning after the International Monetary Fund lowered its growth forecasts for the U.K., citing the impact of tariffs as one factor. Disappointing manufacturing and employment data do not help matters.
The economist says that the vote breakdown among the BoE's nine members will be interesting.
"The question is, how many will opt for a 50 basis point cut? That will determine how dovish the BoE is. But on May 8, it is widely expected that the Bank of England, after staying on hold in March, will trim its bank rate 25 bps to 4.25%," Lee concludes.
- Karee Venema
Fed officials have signaled support for a pause
U.S. central bankers appear to be "in no rush to adjust rates" at the May Fed meeting, writes Marc Giannoni, chief U.S. economist at Barclays.
Fed officials have made it clear that "they view the [current] policy stance as well-positioned to deal with the risks to the inflation and employment sides of their mandate," he adds.
Giannoni says that given the considerable economic and policy uncertainty Fed members are facing, they are "waiting for greater clarity on the evolution of the economy in coming months.
The economist expects both the FOMC statement and Fed Chair Powell "to acknowledge that some market- and survey-based measures of near-term inflation expectations have moved up, and that surveys of households and businesses indicate a decline in sentiment and elevated uncertainty about the outlook."
He also expects Powell to note "that tariffs are likely to cause higher inflation and lower growth."
However, Giannoni believes the Fed will keep rates unchanged this time around, but anticipates two quarter-point rate cuts by year's end.
- Karee Venema
Wall Street gets a heavy dose of earnings during Fed week
The Fed meeting won't be the only thing on Wall Street's radar this week. First-quarter earnings season is well underway, and the lineup of companies that will report over the next few days is long.
Among the most noteworthy names are chipmaker Advanced Micro Devices (AMD), which reports Tuesday evening, and media and entertainment giant Walt Disney (DIS), which unveils its results ahead of Wednesday's open.
Read more: Earnings Calendar and Analysis for This Week (May 5-9)
What Buffett had to say about tariffs
Berkshire Hathaway's (BRK.B) annual meeting, which was held over the weekend in Omaha, Nebraska, is the talk of Wall Street today.
While the biggest news to emerge from the "Woodstock of Capitalism" is the upcoming retirement of CEO Warren Buffett, the famed investor's take on tariffs is getting plenty of attention too.
Tariffs entered the conversation right off the bat, with Buffett saying that "trade can be an act of war" and that it has "led to bad things like the attitudes it's brought out in the United States."
Buffett added that we should encourage global trade, allowing the U.S. to "do what we do best," and for other countries to "do what they do best."
He concluded by saying that using trade as a weapon is not wise and is not right. "The more prosperous the rest of the world becomes, it won't be at our expense – the more prosperous we'll become and the safer we'll feel and your children will feel someday," Buffett offered.
- Karee Venema
What the 10-year Treasury yield is telling us
The U.S. Treasury market has calmed since early April, when President Trump's "Liberation Day" tariffs introduced unprecedented uncertainty for the global economy and financial market volatility spiked.
Treasury yields declined at first on expectations that the broader and deeper tariffs Trump announced would cause a recession.
Yields began to rise, though, as investors, traders, and speculators priced in the potential for higher inflation and weaker growth.
The yield on the 10-year Treasury note spiked from 3.991% on Friday, April 4, to as high as 4.592% intraday on Friday, April 11.
That unusually fast move caused some participants to question the functioning of what is the broadest, deepest, and most important securities market in the world.
The yield on the 10-year Treasury note was 4.35% as of midday on Monday, up from 4.32% on Friday and still trending higher in the aftermath of a stronger-than-expected April nonfarm payrolls report.
That's a normal, healthy reaction – investors, traders and speculators pricing in healthy incoming economic data in an orderly way.
We'll see what the FOMC and Fed Chair Jerome Powell have to say about the health of the labor market, the trajectory of the broader economy, and how both will be impacted by tariffs on Wednesday.
- David Dittman
June rate cut odds keep falling
With a little less than 48 hours to go until the end of the May Fed meeting, the release of an updated monetary policy statement, and Fed Chair Jerome Powell's press conference, 30-day federal funds rate futures prices show a 97.3% probability the FOMC holds things steady at 4.25% to 4.50% on Wednesday.
There's not much in doubt, save for some edits to the statement, maybe some fresh nuance on employment, perhaps some inflation color.
Powell will be pressed to comment on President Trump's tariffs beyond what he's already said – that "the level of the tariff increases announced so far is significantly larger than anticipated" and that uncertainty could lead to a "challenging scenario" for the central bank with regard to its dual mandate of maintaining price stability and achieving maximum employment.
He's not likely to move much off his existing words; that's just not his style.
The Fed chair is also somewhat more secure in his position, if only from the perspective of incoming data, following a stronger-than-expected April nonfarm payrolls report that has Treasury Secretary Scott Bessent writing "the engine is already starting" and "this is just the cylinder firing" in the op-ed section of Sunday's edition of The Wall Street Journal.
Notable is the absence of any reference to the Fed or Powell in Bessent's essay, no repetition of his late call for an interest rate cut. The Treasury secretary only recently joined the president's chorus on that score, citing Treasury market price action that suggests a rate cut is warranted.
It's not happening this week, though. And the probability of a 25 basis point move lower at the June 17-18 Fed meeting has fallen to 29.4% from 60.5% one week ago.
- David Dittman
What time is the Fed meeting?
The May Fed meeting begins today, May 6, with central bank officials gathering to discuss economic policy.
It will conclude on Wednesday, May 7, with the FOMC releasing its latest policy statement at 2 pm Eastern Standard Time.
Fed Chair Jerome Powell will begin his press conference at 2:30 pm EST on Wednesday, May 7.
- Karee Venema
Can Powell send bitcoin to $150,000?
The July Fed meeting is currently the odds-on favorite for the central bank to resume lowering interest rates.
"As expectations firm around a mid-year pivot, capital is already rotating into assets that historically benefit from looser financial conditions," says Matt Mena, crypto research strategist at 21Shares.
And bitcoin, he says, has been a major beneficiary of this shift. "Nearly $2 billion flowed into U.S.-listed bitcoin ETFs last week alone, lifting year-to-date inflows to over $4 billion," Mena notes, pointing out that this was more than any of the sector ETFs.
This underscores a shifting trend in portfolio construction, the strategist adds. "With the prospect of declining real yields, investors are increasingly viewing bitcoin not just as a hedge, but as a high-conviction core asset in a lower-rate regime."
As for the cryptocurrency and the central bank, Mena reminds us that Fed Chair Powell has previously made "measured, positive remarks about bitcoin in recent months."
To wit, Powell said in his presser following the January Fed meeting that the central bank's "role with crypto really is to look at the banks and we think banks are perfectly able to serve crypto customers as long as they understand and can manage the risks and it's safe and sound."
Mena believes that if Powell mentions crypto again in tomorrow's press conference, bitcoin could climb back above $95,000 and make a run toward the psychologically significant $100,000 level.
"From there, all eyes would turn to breaking the $108,500 all-time high and potentially finishing the year around $150,000 if rate cuts accelerate and momentum continues building," he says.
At last check, bitcoin was hovering around $94,000.
- Karee Venema
Powell and his purple ties
While the odds of a May rate cut are low, it's a safe bet that Fed Chair Powell will be wearing a purple tie during tomorrow's press conference.
That's because Powell always wears a purple tie … and there's a reason for it.
During an early April Q&A session with journalists at the Society for Advancing Business Editing and Writing conference, Powell was asked about the meaning of his purple ties.
"At the beginning, the only significance was that I like purple ties," Powell replied. At his next press conference, he said, he went to reach for a red or blue tie and thought, "Maybe not … so I wind up wearing purple."
He said now it's become "a thing," and it supports the fact that the Fed "is strictly non-political" and "bipartisan," and purple is a good color for that.
"Plus, I like purple ties," Powell concluded.
- Karee Venema
When is the next Fed meeting?
After the May FOMC gathering concludes tomorrow afternoon, the next Fed meeting will occur on June 17-18. And the meeting after that will fall on July 29-30.
"FOMC meetings last two days and conclude with the committee releasing its policy decision at 2 pm Eastern time. The Fed chief then holds a press conference at 2:30 pm," explains Kiplinger contributor Dan Burrows.
"[T]he committee meets eight times a year, or about once every six weeks," Burrows notes. "The FOMC is required to meet at least four times a year and may convene additional meetings if necessary."
Read more: When Is the Next Fed Meeting?
Stocks log back-to-back losses ahead of Fed announcement
Stocks closed lower for a second consecutive session Tuesday as investors await substantive terms from the Trump administration amid ongoing talks with its global trading partners.
President Donald Trump welcomed Canadian Prime Minister Mark Carney to the White House on Tuesday afternoon, but little progress came from their discussion.
As for the Fed, all eyes are on tomorrow's policy statement and Chair Powell's subsequent presser. Thirty-day fed funds futures prices reflect a 96.8% probability the Fed will hold interest rates at 4.25% to 4.50%, down from 98.6% on Monday.
Read more: Stock Market Today: Stocks Slip for a Second Straight Day
Stock futures point higher on Fed Day
Stock futures are signaling a positive start on Fed Day. At last check, the Dow Jones Industrial Average is up 0.4% thanks to strong earnings from entertainment and media giant Walt Disney (DIS).
Meanwhile, the S&P 500 is 0.3% higher and the Nasdaq Composite is flirting with a 0.2% lead.
- Karee Venema
Why Powell & Co. can remain data-dependent
Scott Helfstein, head of investment strategy at Global X, says Fed Chair Powell will likely be careful with his words during today's press conference.
Stocks sold off sharply after Powell spoke in Chicago a few weeks ago, with the Fed chair saying markets are doing what they're supposed to do," and that the Fed will not intervene if the stock market plummets.
Powell also said that while the economy is "moving away" from the central bank's dual mandates for price stability and full employment, the Fed is "well-positioned to wait for greater clarity" before making changes to current monetary policy. In other words, it's in no hurry to cut interest rates prematurely.
Helfstein agrees that there "isn't a good reason to change rates at this point, and the Fed is likely to reiterate the need for more data with three rate cuts priced in for 2025, at this point starting in the summer."
He cites strong corporate earnings, a resilient U.S. economy and stable price growth as reasons the central bank can maintain its data-dependent approach.
- Karee Venema
What time is Jerome Powell speaking today?
The May Fed meeting will conclude today, May 7, with the FOMC releasing its latest policy statement at 2:00 pm Eastern Standard Time.
This will be followed by Fed Chair Powell's press conference, which will begin at 2:30 pm EST and run for roughly an hour or so.
You can watch Powell's presser on the Federal Reserve website or on its YouTube channel.
What the experts are saying about Fed rate cuts
"The Federal Reserve is unlikely to lower rates this week or to act decisively until after July 8, when the 90-day tariff pause ends.
"The resilient labor market, as evidenced by Friday's job report, gives them further room to delay action. We still expect one to two cuts before year-end, with the first cut most likely in late summer or fall." - Emily Bowersock Hill, CEO and founding partner at Bowersock Capital Partners
"Powell has emphasized the risks tariffs pose to the Fed's dual mandate, warning they could fuel both inflation and unemployment.
"With inflation expectations stable – the five-year breakeven fell to 2.4% – and recent economic data strong, the Fed has room to stay patient and cautious on rate cuts. That stance is critical in a market still sensitive to policy signals." – Mark Hackett, chief market strategist at Nationwide
"While markets have been volatile since the Fed's last meeting in mid-March, the central bank is not expected to react to the recent turbulence by easing policy rates.
"Given the potential inflationary impact of widespread tariffs, it's likely that we'll get some additional comments from Powell discussing whether the Fed is viewing the tariffs as a transitory factor or, potentially, a driver of more persistent long-term price pressures.
"If we see signs of the former, it would likely be seen as supportive for markets, while the latter would likely represent a headwind." – Sam Millette, director of fixed income at Commonwealth Financial Network
"The Fed is in a bit of a pickle. If it is confronted with both an economic slowdown and rising inflation at the same time, which should it choose to address?
"It would normally cut rates to deal with a slowdown, and raise rates to counter higher inflation. The Fed's preference is likely to stand pat until it sees an economic slowdown." – David Payne, staff economist at The Kiplinger Letter
"The Fed is most assuredly expected to keep rates unchanged at Wednesday's meeting as recent data does not support lowering interest rates. We expect only one rate cut this year with a small possibility of zero cuts.
"Rate cuts are not justified as inflation remains sticky and above the Fed's stated 2% inflation target. Furthermore, there are serious concerns that the tariff situation will introduce inflationary pressures that will begin to reveal themselves as time progresses.
"In keeping with the Fed's stated dual-mandate, they face the daunting task of balancing price stability and maximum employment during a period of unprecedented uncertainty and stress upon the economy." – Chris Brigati, chief investment officer at SWBC
Stocks trade mixed ahead of Fed decision
The main stock market indexes are mixed ahead of this afternoon's 2 pm EST Fed decision.
At last check, the Dow Jones Industrial Average is up 0.6% and the S&P 500 is 0.2% higher. The Nasdaq Composite, though, is down 0.3%.
Top gainers at midday Tuesday are Walt Disney (DIS, +10%) and Charles River Laboratories (CRL, +16%).
Marvell Technology (MRVL, -11%) and Alphabet (GOOGL, -8%) are among the biggest decliners.
The Fed announcement is in
The Federal Open Market Committee just released its latest policy announcement. As expected, the central bank held its federal fund rate steady at a range of 4.25% to 4.5%.
The central bank cited "solid" economic activity for not lowering rates this time around, and emphasized that it will take action later if conditions warrant it.
- David Payne
Here's what changed in the FOMC statement
Changes to the FOMC's latest policy statement include the following:
Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. (Previously read: Recent indicators suggest that economic activity has continued to expand at a solid pace.)
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen. (Previously read: The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty around the economic outlook has increased. The Committee is attentive to the risks to both sides of its dual mandate.)
The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. (Previously read: The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion. The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion.)
- Karee Venema
Dow gains fade, S&P 500 swings lower after FOMC statement
The S&P 500 swung lower after the Fed released its May policy statement, last seen down 0.4%. The Dow Jones Industrial Average has pared its earlier gains, now up a modest 0.1%.
Over in the bond market, the yield on the 2-year Treasury bond is down 2.5 basis points at 3.764%, and the yield on the 10-year Treasury bond is off 5.3 basis points at 4.265%. (A basis point = 0.01%.)
Tariffs are impacting inflation expectations
At the start of his press conference, Fed Chair Powell said tariffs are to blame for higher inflation expectations in recent consumer sentiment surveys.
If large tariffs are sustained, then the economy will likely slow, though the impact on inflation could be limited.
- David Payne
Powell reiterates the Fed's ability to stay patient
"The economy appears to be growing at a solid pace," and the labor market appears to be in a good place, Powell said, allowing the Fed to stand pat on any interest rate cuts for the time being.
He acknowledged the drag on GDP growth in the first quarter from a flood of imports being rushed in ahead of imminent tariffs, but said that if you take out that "distortion," the economy still appears to be reasonably healthy.
"We don't have to be in a hurry" to make any changes to monetary policy, either to give the economy a boost by cutting rates, or fighting inflation by raising rates, if tariffs fuel future inflation," Powell said.
- David Payne
Risks to the Fed's dual mandate are rising, Powell says
Asked if he "still sees a path for a soft landing" at a time when many economists have raised their odds of a recession hitting, Powell noted that the risks of higher unemployment and higher inflation have risen.
He allowed that the Fed might take a while to make more progress on its twin goals of lowering inflation and ensuring full employment.
And he acknowledged that it could be harder for the Fed to act preemptively to combat inflation caused by tariffs by raising interest rates than in prior economic cycles when the Fed tried to get ahead of slowdowns in economic growth.
- David Payne
Should the Fed cut rates at all this year?
Asked if the Fed should be cutting rates "at all this year" when inflation just ticked down, Powell demurred, saying "We just don't know" how the administration's tariffs will settle out.
Conversely, when asked if President Trump calling on the Fed to cut rates to help the economy makes his job harder, Powell said, "It doesn't affect either our job or the way we do it."
The Fed will stick strictly to what the incoming economic data show.
- David Payne
What is QE?
"Quantitative easing is the deliberate expansion of the central bank's balance sheet. The Fed purchases assets such as government bonds and mortgage-backed securities (MBS) in the open market," writes Kiplinger contributor Will Ashworth.
"The move, which increases the money supply, is intended to lower longer-term interest rates, stimulating lending and economic activity," he adds."
Read more: What Is Quantitative Easing and Why Does the Fed Use It?
Powell reiterates confidence in the U.S. economy
Powell admitted that there is a lot of "soft" data that indicates the economy may soon slow down. But any slowdown isn't showing up in the "hard" data yet, such as the employment report for April.
He noted that "consumers keep spending," and that the labor market is holding up.
Clearly, Powell wants to project that while he's alert to risks to the economy related to tariffs, especially the uncertainty over what the administration's trade policies really are, he is not overly concerned about where things stand now.
The question is whether financial markets will feel heartened by his qualified confidence.
- David Payne
What needs to happen for the Fed to cut interest rates?
It sounds like only a significant increase in unemployment would prompt the Fed to cut rates.
Powell emphasized that job creation is still good, the jobless rate is low, and there are no signs of major layoffs.
When pressed to identify what would spur the Fed to lower rates, he again emphasized all of those positive signs about the labor market.
The takeaway for investors: The Fed will not be ready for a rate cut unless and until the labor market data really deteriorate.
- David Payne
Powell does not comment on tax cuts
"We do know that the (national) debt is on an unsustainable path," said Powell, but he refused to answer a question about the fiscal soundness of legislation taking shape in Congress that would extend tax cuts while also possibly cutting spending.
Powell was adamant that it's not the Fed's job to give advice to Congress on the fiscal policy of taxing and spending, and then added "just as it's not their job to give us advice on monetary policy," drawing chuckles from the press.
The message: Powell will not be commenting on any political matters, whether it's President Trump's trade policies or what lawmakers do on Capitol Hill.
- Jim Patterson
Jim is the managing editor of The Kiplinger Letter and The Kiplinger Tax Letter. He joined The Kiplinger Letter in December 2010, covering energy and commodities markets, autos, environment and sports business, and previously covered federal grant funding and congressional appropriations for Thompson Publishing Group.
May Fed meeting: What the experts are saying
With the May Fed meeting now in the books, here's some of what economists, strategists and other experts around Wall Street have to say about the outcome and what it could mean for investors going forward.
The FOMC statement "showed no shift in the Fed's current cautious approach to policy decisions and underlined the uncertainty in economic data that will likely see them hold rates through the first half of this year.
"However, the Fed's cautious approach will likely become difficult over the next few months as volatile data clouds the economic outlook and pressure to resume cuts increases from the market and the Trump administration." – Ryan Weldon, investment director and portfolio manager at IFM Investors
"Whether you like it or not, the mantra for Chair Powell's Fed has always been to make sound policy decisions established from the certainty of economic statistics, or in other words, remaining heavily data dependent.
"The committee toned down the concern over the negative GDP figure in Q1 given the impact from net exports, which tells us that despite volatile markets, the current state of the U.S. economy shows expanded activity at a solid pace." – Charlie Ripley, senior investment strategist for Allianz Investment Management
"Today's FOMC meeting is likely to leave investors 'waiting and seeing' alongside the Fed. This dynamic is not new for the Powell Fed, which waited longer but moved more forcefully once the decision to adjust rates came in both 2022 and 2024.
"A less anticipatory Fed is more likely to compound uncertainty and volatility in the coming months. As a result, we believe quality and dividend growth are investment styles that are likely to remain in favor in the coming months." – Josh Jamner, investment strategy analyst at ClearBridge Investments
"We still believe that a stagflation call is completely out of touch with what stagflation is. Thus, while we also recognize the risks to higher unemployment and higher inflation, this risk has not yet risen to a point where we would consider stagflation a certainty." – Eugenio Alemán, chief economist, and Giampiero Fuentes, economist at Raymond James
- Karee Venema
Stocks close higher after the May Fed meeting
Stocks enjoyed a late rally into the closing bell on Wednesday after Fed Chair Jerome Powell wrapped up a post-FOMC meeting press conference highlighted by discussion of uncertainty and the potential for stagflation.
The blue-chip Dow Jones Industrial Average was up all day, led by a double-digit gain for Walt Disney (DIS).
After trading in the red for most of Wednesday's session, the tech-heavy Nasdaq Composite lurched to a 0.3% gain to 17,738. And the broad-based S&P 500 rose 0.4% to 5,631.
"We think, right now, the appropriate thing to do is to wait and see how things evolve," Powell said. "There's so much uncertainty. If you talk to businesses, or market participants, or forecasters, everyone is just waiting to see how developments play out.
"And then we'll be able to make a better assessment of what the appropriate path for monetary policy is. So we're not in that place."
The U.S. Dollar Index (DXY) was stronger by 0.7% to 99.88. The DXY is down 9.3% from its January 13 52-week high of 110.18.
And the yield on the 10-year Treasury note softened to 4.279% from 4.381% on Tuesday. The yield on the 10-year climbed as high as 4.592% in the aftermath of President Trump's "Liberation Day" tariffs announcement.
"The Fed still sees the economy on solid footing," writes Morgan Stanley Wealth Management Chief Economic Strategist Ellen Zentner, "but acknowledges upside risk to both sides of their mandate – unemployment and inflation – because of tariffs."
Zentner adds that "with stagflation risks rising, the Fed’s communications will emphasize patience until there is enough clarity in the data."
- David Dittman
Trump criticizes Powell
President Trump took to Truth Social Thursday morning to criticize Fed Chair Powell for keeping interest rates unchanged at its May meeting.
"'Too Late' Jerome Powell is a FOOL, who doesn’t have a clue," Trump wrote in his post. "Oil and Energy way down, almost all costs (groceries and 'eggs') down, virtually NO INFLATION, Tariff Money Pouring Into the U.S. — THE EXACT OPPOSITE OF 'TOO LATE!' ENJOY!"
Trump did add that other than their disagreement on monetary policy, he does "like him [Powell] very much!"
The next Fed meeting is scheduled for June 16 and 17. According to CME FedWatch, futures traders are pricing in an 80% chance the central bank will hold rates steady again, with the first quarter-point rate cut not expected until June.
We appreciate you joining us this time around and look forward to seeing you next month.
- Karee Venema