Federal Reserve Kicks Off May Meeting—What to Know

Fed Chair Jerome Powell is expected to wait for more clarity on the Trump administration’s policy changes.

Federal Reserve Chairman Jerome Powell testifies before the Senate Committee on Banking, Housing, and Urban Affairs on Capitol Hill in Washington on Feb. 11, 2025. Madalina Vasiliu/The Epoch Times

The Federal Reserve kicks off its two-day May policy meeting on May 6, and Chair Jerome Powell is expected to push back against President Donald Trump’s calls for interest rate cuts.

Investors overwhelmingly anticipate the rate-setting Federal Open Market Committee (FOMC) will leave the benchmark federal funds rate between 4.25 percent and 4.5 percent.

If accurate, this would represent the fourth consecutive meeting of the U.S. central bank keeping its easing cycle on pause.

For weeks, monetary policymakers have advocated a wait-and-see approach.

This tactic is unlikely to be adjusted until sufficient data shows that the Trump administration’s fundamental changes to fiscal, immigration, regulatory, and trade policy have traversed through the marketplace.

Speaking at the Economic Club of Chicago last week, Fed Chair Jerome Powell stated that the president’s tariffs could lead to a one-time price adjustment or persistent cost pressures.

“The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” Powell said in April.

Tim Cooper, an analyst at MNI, thinks the FOMC statement will not change significantly.

However, Powell will likely emphasize upside risks to the institution’s twin maximum employment and price stability mandates, Cooper said.

“As the FOMC awaits clarity in both government policy and the data on the degree to which one if not both dual mandate targets will be missed, most participants will continue to support a holding pattern until there is a clearer signal to act,” Cooper said in a May 2 note.

A chorus of Fed officials has suggested more concern surrounding inflation than growth prospects.

At the April 10 Outlook for North American Trade and Immigration conference in Dallas, Dallas Fed President Lorie Logan emphasized the importance of preventing “any tariff-related price increases from fostering more persistent inflation.”

Kansas City Fed President Jeffrey Schmid, in a speech to a financial roundtable last month, stated he is “squarely focused on the outlook for inflation.”

So far, the economic data have presented mixed assessments of the broader economy.

Core PCE Eases

First-quarter GDP was negative 0.3 percent, driven by a 41 percent spike in imports and a tepid decline in government expenditures.

The same Bureau of Economic Analysis GDP report highlighted a 22 percent increase in private investments.

In April, the U.S. labor market created 177,000 new jobs, and the unemployment rate was unchanged at 4.2 percent.

On the inflation front, the Fed’s preferred personal consumption expenditure (PCE) price index slowed sharply to 2.3 percent in March.

Core PCE, which removes the volatile energy and food categories, also eased significantly to 2.6 percent.

“There’s survey data that talks about a slowdown, but the hard data continues to be resilient,” Treasury Secretary Scott Bessent told CNBC on May 5.

These numbers may buy the Federal Reserve more time before it is forced to take policy action.

Treasury Secretary Scott Bessent speaks to reporters during a briefing at the White House on April 29, 2025. Travis Gillmore/The Epoch Times

Economists think conditions could change as tariffs may begin appearing in the hard data in the coming months.

“What Trump policy has put into motion is a longer-term threat and will show up over the next months, not days,” said Bryon Anderson, the head of fixed income at Laffer Tengler Investments, in a note emailed to The Epoch Times.

For now, the current economic landscape will not be enough to persuade the Fed to follow through on interest rate cuts.

“With the US labor market conditions remaining intact, the Fed can remain a spectator on the sidelines with respect to policy changes as the fallout from Trump’s higher tariff regime and shifting trading policy appears to be lagging,” said Charlie Ripley, the senior investment strategist for Allianz Investment Management.

According to the CME FedWatch Tool, investors have pushed out their rate-cut forecasts. Investors are now penciling in a quarter-point interest rate cut at the July policy meeting.

“Barring some unexpected developments, we would think that the median Committee member [which pencilled in 50bp of cuts as of the March FOMC] is only looking to cut later in the year, perhaps not before September,” Cooper added.

Economists at RBC Economics believe the U.S. central bank may not pull the trigger on a 25-basis-point reduction until September.

Michael Brown, Pepperstone’s senior research strategist, says the June policy meeting will be compelling as officials release an updated Summary of Economic Projections (SEP).

This is a widely watched quarterly survey of where policymakers think the economy and policy are headed.

“A considerable amount has taken place since the last FOMC meeting in mid-March, which has rendered the forecasts issued in the last SEP effectively redundant,” Brown said in a note.

March SEP showed a downward revision for GDP growth this year, from 2.1 percent in December to 1.7 percent.

The unemployment rate was also adjusted slightly higher from 4.3 percent to 4.4 percent.

PCE and Core PCE were higher at 2.7 percent and 2.8 percent, respectively.

Tug-of-War with Trump

Over the past several weeks, the president has repeatedly urged Powell and his colleagues to lower interest rates.

Following last week’s better-than-expected April jobs report, Trump took to social media to criticize Powell and the Federal Reserve.

“Just like I said, and we’re only in a transition stage, just getting started!” Trump said on Truth Social shortly after the better-than-expected April jobs report last week.

“Consumers have been waiting for years to see pricing come down. No inflation, the Fed should lower its rate.”

The president blasted Powell on social media last month, writing that his “termination cannot come soon enough.”

These comments spooked markets as the leading averages slumped across the board.

In an interview with NBC’s “Meet the Press with Kristen Welker” that aired on May 4, Trump confirmed again that he would not fire Powell before his term ends in May 2026.

“No, no, no,” Trump said. “Why would I do that? I get to replace the person in another short period of time.”

Speaking to reporters at the November post-meeting press conference, Powell said that removing him as chair is “not permitted under the law.”