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The recent tariff turmoil in the market has led investors to return expectations for interest rate cuts from the Federal Reserve coming in May.
The Fed fund futures market is priced at 16% of the time to cut 25bps next month. That's down from 45% just a week ago.
What has changed? The FOMC members began talking.
Fed Gov. Chris Waller yesterday said the impact of tariff inflation could be “temporary.” He said before, but added that he hopes that if the economy is too slow, FOMC will be cut “quickly sooner.”
Chairman Jerome Powell said earlier this month that the central bank plans to take a “waiting” approach to Trump's trade policy. This is no surprise given the administration has given markets over the past two weeks. When tariff rates change almost every day, it is difficult to estimate too much about the effects of inflation.
