U.S. Federal Reserve Expected to Hold Rates Steady on May 7, 2025, as Attention Turns to June
The U.S. Federal Reserve (Fed) is widely expected to keep its policy rate unchanged at its May 7 meeting. However, all eyes are now on June. Recent economic data, market pricing, and political pressures are increasing the likelihood of a rate cut as summer approaches.
Hammack Sends a Clear Signal
The Fed has held interest rates steady in the 4.25%–4.50% range for the past two meetings. While inflation data suggests a mild cooling, signs of weakening economic growth are also emerging. Cleveland Fed President Beth Hammack said May is too early for a rate cut, but referred to June as a potential turning point.
Powell to Speak: His Messages Will Be Crucial
Fed Chair Jerome Powell’s statements today will play a key role in shaping market sentiment. With his usual “data-dependent” language, Powell is expected to signal that a rate cut window could open in June. However, he may also adopt a selective tone without fully committing.
Trump Sends a Clear Message to the Fed: “Cut Rates”
U.S. President Donald Trump has made interest rate cuts a central focus of his economic policy. A statement from the White House emphasized, “Prices are falling, energy is getting cheaper, the Fed should cut rates now.” Having won the 2024 election, Trump aims to establish a growth model driven by employment and investment.
What Are Markets Expecting?
Markets had already priced in a pause at the May meeting. However, interest rate futures for June now reflect a strong probability of a 25 basis point cut. Assets like gold, Bitcoin, and the Nasdaq have already responded positively to this expectation.
June Could Be a Turning Point
The June 17–18 meeting is shaping up to be a pivotal moment for 2025. With inflation momentum slowing and the labor market softening, the first signals of a rate cut could be delivered.
If the Fed announces today that it is holding rates steady, it will come as no surprise. The real focus will be on Powell’s nuanced remarks. Any potential rate cut in June will be a key indicator of the direction of the U.S. economy and global market risk sentiment.
