Emre Yumlu 
The Federal Reserve (Fed) is expected to keep interest rates unchanged as it awaits clearer signs about the direction of the U.S. economy. However, recent data has only added to the uncertainty, making the path forward less predictable. The Fed’s current meeting will conclude on Wednesday, May 7, with a decision to be announced at 2 p.m. EDT (1800 GMT). So, what are the expectations?
Economic signals are mixed: GDP contracted in the first quarter, while both consumer and business confidence declined. On the other hand, the labor market remains strong and consumer spending is still robust. This contradictory picture makes it difficult to determine whether a rate cut is on the horizon.
What Will the Fed Decide? Inflation Signals Remain Mixed
The Fed’s preferred inflation gauge, the PCE Index, fell to 2.3% in March, marking the lowest level in six months. However, core inflation, which excludes food and energy, remains elevated at 2.6%. In addition, President Trump’s tariff policies may push inflation higher later this year, prompting the Fed to stick with a cautious “wait-and-see” approach.
Strong Labor Market, Weak Confidence
In April, 177,000 new jobs were created, and the unemployment rate held steady at 4.2%. This limits the urgency for the Fed to lower rates in the near term. Yet soft data — including business surveys and corporate sentiment — paints a picture of widespread economic uncertainty.
Without clarity on policy, especially on trade and tariffs, the Fed is unlikely to make any sudden moves. For now, the most probable scenario is that the policy rate remains in the 4.25% to 4.50% range until the July 29-30 meeting.
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