The Fed meeting and press conference is on next wednesday.
The CME fedwatch survey shows market expects Fed to do 2-3 rate cuts this year.
But in my view, with the present uncertainty with fast changing tariff rules and DOGE based cuts, the Fed cannot model it's affect on the inflation and unemployment.
Without a working model and predictions, ***Fed cannot realistically cut rates***.
The best they can do is hold rates and wait for some clarity on how much tariffs will be applied into this year and next. And then decide on whether to cut or raise rates. The affect of tariff will take time to show up in the economy and there is still time for Fed to act.
And if Fed acts early and say makes a rate cut , and 2 months later we end-up with high inflation, it will make things a lot worse and raising rates will panic the market.
Additionally the deportation hasn't picked up and it will also affect the economy in unknown ways. Deportation can cut unemployment and raise inflation, which would force Fed to maintain rates or in worse case raise them.
The Fed rate cut expectations from traders/investors, is more out of desperation hoping that cut will boost the market. It will be very dangerous to act early and Fed having seen the inflation past 2 years will be cautious.
I expect Powell to not commit to any rate cut, instead sweet talk saying we are watching closely and in case of any risk of recession, high unemployment or liquidity crisis, we will act aggressively. But right now we are waiting to see how the tariff affects unfolds and we will follow the data.
In short talk encouraging but not commit to any rate cut.
Am interested in your views ( to make sure I am not thinking wrong or crazy.)
cme fedwatch survey : [https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html](https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html)
