Federal Reserve Expected to Hold Rates Amid 1% Cut Probability

The market is overwhelmingly expecting the Federal Reserve to maintain current interest rates during its policy announcement tonight, with only a 1% probability of a rate cut. This expectation comes as the Federal Reserve's Federal Open Market Committee (FOMC) is set to reveal its latest policy decision, marking the second Fed meeting of 2025. Investors are closely monitoring the Fed's stance on future rate cuts, especially given the recent tariff measures that have added to economic uncertainty.

The central bank's Summary of Economic Projections (SEP) and dot plot will provide crucial insights into policymakers' expectations for growth, inflation, and potential rate cuts later in the year. Analysts anticipate signals of deeper rate cuts in 2025. However, the Fed is widely expected to keep interest rates steady at 4.25%-4.50%, following three consecutive rate cuts in 2024.

The Fed's guidance on inflation and economic resilience will be critical for global markets, as the recent tariff measures have raised concerns about potential economic disruptions. Some analysts have cautioned that the US is heading towards a “stagflation shock,” which could severely restrict the Federal Reserve’s policy flexibility. Retaliatory measures from other countries have already begun, raising fears of a prolonged trade conflict.

Despite market volatility, some analysts still predict that the Federal Reserve is likely to cut interest rates two to three times this year. However, the Fed's cautious approach to rate cuts, as signaled by Fed Chair Jerome Powell, suggests that the central bank is prioritizing stability over immediate rate adjustments.

The market's focus on the Fed's policy decision comes amid heightened economic uncertainty and volatility. Some analysts have raised alarms over the economic risks facing the US, likening the situation to “messing around with nitroglycerin.” They have criticized the administration’s approach, warning that dismissing short-term recession concerns in favor of long-term gains could have serious political consequences.

In summary, the market is overwhelmingly expecting the Federal Reserve to maintain current interest rates tonight, with only a 1% probability of a rate cut. The Fed's policy decision will be closely watched for signals on future rate cuts and the central bank's stance on economic resilience amid ongoing global uncertainty.