Fed Holds Rates Steady Amid Rising Inflation and Trade Tensions
Market Overview
The Federal Reserve is expected to maintain its policy rate at 4.25% – 4.50% during today’s FOMC meeting. Since no change is expected during the meeting, all eyes are now on Fed Chair Jerome Powell’s post-meeting speech to find clues about rate cuts in the second half of 2025.
Fundamental Analysis
The Fed faces strong pressure from resilient labor market data and persistent inflation. The March Core PCE reading was 3.5%, well above the Fed’s target of 2%. Meanwhile, ISM Services PMI data also showed accelerating prices in the services sector. Consumer inflation expectations have also peaked to multi-decade highs, complicating the policy outlook.
Due to frontload imports ahead of tariff implementation, the US GDP for the first quarter weakened. However, the NFP number came at 177k for April, beating expectations. The Fed’s data dependency and cautious stance lead to no immediate rate cut for now.
Powell is expected to deliver a balanced message. Analysts forecast that the Fed may refrain from cutting rates but acknowledge inflationary pressure and show a dovish tilt for late 2025.
On the other hand, geopolitical developments add more complexity to the situation. Treasury Secretary Scott Bessent Trade Representative Greer will meet Chinese Vice Premier He Lifeng in Switzerland this week. The news sparked optimism regarding US-China trade relations. The dollar soared after a three-day slide ahead of the FOMC.
Cryptocurrency markets are also anxious ahead of the Fed’s decision. Investors and political figures like Trump are calling for rate cuts. Powell is under pressure, but data remains the guiding star for the Fed, not sentiment.
Markets are reflecting a wait n watch stance with only a 2% chance of a rate cut in May. Meanwhile, Goldman Sachs and Bank of America project three to four rate cuts in 2025.
Technical Analysis
On a 30-minute chart, there is a notable confluence of price action, as a 30-minute order block aligns with the Fibonacci extension level. As a result, during or shortly after the first 30 minutes, the gold price may reach this level, which is also near the 3400 mark, potentially acting as a resistance area. If the FOMC decision reflects a dovish or accommodative stance, we can anticipate continued bullish momentum in gold prices. Conversely, if the FOMC decision is hawkish or indicates liquidity tightening, a downward movement in gold prices may occur.
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