This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:
Despite their differences, the Federal Reserve and President Trump appear to have one very important thing in common: Both are on pause.
The Fed on Wednesday is expected to leave interest rates unchanged in a range of 4.25% to 4.50%. And with Trump about one-third of the way through his own 90-day “reciprocal” tariff break, some on Wall Street expect the Fed to emphasize that it also remains in a holding pattern of a similar length.
“The Federal Reserve is unlikely to lower rates this week or to act decisively until after July 8, when the 90-day tariff pause ends,” Emily Bowersock Hill, CEO of Bowersock Capital Partners, wrote in a note on Tuesday. “The resilient labor market, as evidenced by Friday’s job report, gives them further room to delay action.”
With so many variables to account for and lagging indicators that have yet to reveal themselves, the Fed is squarely in wait-and-see mode.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
Market bets for Wednesday’s policy decision put the chances of keeping rates where they are at a near certainty. The odds for June are also tilted in favor of a pause. And that meshes with everything Fed Chair Powell has said leading up to the conclusion of the May huddle.
Because if tariff policy isn’t set, how can central bankers fully appreciate their ripple effects on growth, inflation, and jobs?
Read more: The latest news and updates on Trump’s tariffs
“Odds are the central bank will wait as long as possible before cutting to ensure that tariffs don’t prove stickier, particularly as supply-chain stress will intensify, and that inflation and expectations don’t become dislodged,” Ryan Sweet, chief US economist at Oxford Economics, wrote in a preview of the Fed’s policy meeting.
Suspending the heaviest “Liberation Day” tariffs has granted the Federal Reserve even more freedom to wait. Perhaps ironically for the White House, the 90 days it bought itself to iron out trade deals has also given the Fed more reasons to avoid a rush to cut.
Even as Trump continues to prod the Fed to lower rates, officials have to contend with fresh, resilient jobs data, an indicator that pushes against a move to reduce rates. At the same time, Powell and his colleagues are still grappling with stubborn pricing pressures, which are expected to increase alongside existing tariffs and those potentially to unfold.
