US Fed Watch: Fed won’t cave to Trump pressure

A contraction in GDP and near-flatlining in core PCE prices would usually be more than enough to persuade policymakers at the Fed to cut interest rates. Since those data precede the implementation of tariffs at the start of April, however, there remains far too much uncertainty for the Fed to adjust policy at next week’s meeting. We continue to expect a tariff-induced rebound in goods prices to keep the Fed on the sidelines this year.