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Published on Monday, March 17, 2025

US | Fed set to hold rates on mounting risks despite recent signs of economic softening

Summary

We do not expect either the statement or Powell to hint at a possible rate cut soon amid heightened downside risks to growth and instead expect both to convey that amid lingering uncertainty the Fed remains comfortable in its current wait-and-see mode and is in “no hurry” to resume the rate cut cycle.

Key points

  • Key points:
  • While consumer spending remained robust in Q4, recent data suggests increased consumer caution and headwinds for the manufacturing sector amid tariffs.
  • Recent labor market data presents a mixed but generally stable picture, marked by continued job growth and an unemployment rate around its steady-state level.
  • February's CPI inflation data presented a mixed bag of positive moderation signs but also persistent concerns; a strong dovish pivot is highly improbable.
  • The futures market has almost fully priced in the Fed will remain on the sidelines this week and considers that will also be the case by the May meeting.
  • The implementation of tariffs during the intermeeting period will likely compel the Fed to begin to formally acknowledge the inflationary risk from such policy decisions.

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Report (PDF)

Fed set to hold rates on mounting risks despite recent signs of economic softening

English - March 17, 2025

Authors

JA
Javier Amador BBVA Research - Principal Economist
IF
Iván Fernández BBVA Research - Senior Economist
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