Fed Meeting Today: Powell’s Speech, Economic Outlook To Be On Investors’ Radar

Despite repeated pressures from U.S. President Donald Trump to reduce interest rates, the Federal Reserve is unlikely to yield to his demand when the central bank unveils its May policy outcome on Wednesday.

Fed Chair Jerome Powell has asserted in the past that the central bank can afford to wait for more data before making any adjustments to the policy. And that’s what the majority of the traders believe.

According to the latest CME FedWatch Tool data, traders have factored in a 95.65% probability that the Fed will keep the rates unchanged.

Traders have also dialed down their expectations about cumulative rate reductions in 2025 to 75 basis points (bps) from 100 bps earlier.

Observations From The Policy

Although the Fed is expected to keep rates unchanged, investors will be eyeing the minor changes in the statement's wording.

The central bank’s assessment of the economic outlook will also be key, especially after the contraction in the first-quarter GDP. Notably, the Fed stated earlier that uncertainty around the economic outlook had increased.

Another factor that will be closely watched is the dot-plot rate projections.

In March, the projections showed that 11 of the 19 policymakers expect the central bank to cut rates by 50 basis points in 2025, translating into two quarter-point rate reductions this year. Previously, 15 officials had factored in at least two rate cuts.

Investors will be curious to know if there has been any major change in the officials’ assessment of this year’s rate trajectory.

Powell’s Speech

While President Trump has repeatedly criticized the Fed Chair, Powell is expected to take an objective stance.

In April, he stated at The Economic Club of Chicago that the central bank is well-positioned to wait for greater clarity before considering any adjustments to its monetary policy stance. The Fed Chair also asserted that tariffs are highly likely to generate at least a temporary rise in inflation.

On Wednesday, investors will want to dissect Powell’s speech to understand whether he has tweaked his stance on monetary policy trajectory in the wake of the contraction in GDP and the backlash he has been receiving from the President.

Powell is also likely to be questioned about his response to the President’s attacks on him.

On Wednesday, benchmark U.S. indices recorded gains. The SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500, traded 0.48% higher on Wednesday, while the Invesco QQQ Trust, Series 1 (QQQ), which tracks the Nasdaq Composite, was up 0.34%.

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