As traders prepare for the upcoming Federal Open Market Committee (FOMC) meeting in May, the question of whether the U.S. Federal Reserve, led by Jerome Powell, will cut interest rates looms large. However, current data and expert opinions suggest that a rate cut is unlikely.
FedWatch Data: Low Probability of Rate Cut
According to the latest CME FedWatch data, there is only a 9% probability that the Fed will reduce interest rates following the FOMC meeting scheduled for May 6-7, 2025. Instead, the market overwhelmingly expects the Fed to maintain rates at their current levels, between 425 and 450 basis points (bps). Polymarket traders share this sentiment, with a 90% chance that rates will remain unchanged after the May meeting.
Why the Fed Is Unlikely to Cut Rates
The Fed’s cautious stance on a rate cut is backed by several factors. Fed Chair Jerome Powell recently indicated that the Fed has no plans to lower rates until the full economic impact of U.S. President Donald Trump’s tariffs on China and other countries is clear. Powell has also expressed concerns that the tariffs could lead to higher inflation, which would discourage the Fed from easing monetary policy prematurely.
In addition to Powell’s comments, market expert Kevin Green noted that the Fed is unlikely to cut rates unless there is a substantial downturn in the labor market. While the economic data has been mixed, Green pointed out that with prices rising, new orders slowing, and general economic activity declining, there is no pressing need for the Fed to reduce rates at this time.
Trump’s Push for a Rate Cut
Despite Powell’s cautious approach, U.S. President Donald Trump has repeatedly urged the Fed to cut rates, arguing that it is essential to prevent a slowdown in the U.S. economy. Trump’s calls for a rate cut, however, have been met with resistance from the Fed, which is focused on the long-term stability of the economy.
Market Reactions and Data to Watch
Despite the strong market consensus that the Fed will not cut rates in May, some forecasts remain bullish. Bank of America, for example, predicts that the Fed will eventually implement four rate cuts in 2025, with the first expected in May, followed by others in July, September, and December. Market participants will closely monitor upcoming economic reports, such as the U.S. GDP and Personal Consumption Expenditures (PCE) inflation data, scheduled for release on April 30. These reports could provide key insights into the Fed’s next move.
If the Fed does decide to cut rates, it could be a positive development for risk assets, including Bitcoin and the broader cryptocurrency market, as a rate cut generally leads to more capital flowing into these sectors.
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