US | Fed likely to hold rates steady in June as it awaits clearer signals from data

Summary

Recent softness in sentiment is not enough to shift policy as solid demand and stable jobs data support a continued pause. Attention now turns to assess whether this cautious pause could extend deeper into the second half of the year.

Key points

• Key points:
• The Fed left rates unchanged at 4.25-4.50% and reiterated that a wait-and-see approach remains the most appropriate response to persistent uncertainty.
• Powell summarized the current state of the US economy by saying the data portray “a healthy economy albeit one that is shrouded in some very downbeat sentiment.”
• He continued to signal that the Fed is not "in a hurry" to change its stance and that policy is well-positioned to respond to either persistent inflation or weak growth.
• But the Fed—like most analysts, us included—appears to be operating under a baseline in which tariffs will ultimately push inflation higher.
• In sum, today’s announcement reinforces our view that the Fed is unlikely to deviate from its wait-and-see approach and will hold rates steady again when it meets in June.

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