Walking a tightrope among various pressures! The Federal Reserve may "stand pat" at this meeting.

At the May meeting, the Fed may not do anything. Due to the uncertainty caused by President Trump's tariffs, as well as the mixed signals of strength and weakness in the US economy, the Fed can only wait and see. Vincent Reinhart, a former senior Fed official and current chief economist at BNY Investments, said, "This meeting will be awkward, as the Fed does not have a clear forecast for the future direction of the upcoming meetings." Reinhart pointed out that before taking action, the Fed needs to satisfy two conditions: first, confirm that policies such as tariffs are really implemented; second, observe how these policies affect inflation expectations. "Therefore, the Fed must delay first and then proceed cautiously." From market reactions, traders do not believe that there will be a rate cut at this week's meeting. According to the CME Group's FedWatch tool, there is only about a one-third chance that the meeting on June 17-18 will result in a rate cut. Over the past week, market expectations have shifted due to mixed economic data and signs of a softer stance on tariffs from the Trump administration. The White House has signaled that multiple trade agreements are nearing completion, although no substantial agreements have been reached. Reinhart stated that BNY's expectation is for two rate cuts this year, slightly lower than the market's previous expectation of three cuts. Just a week ago, the market was even betting on as many as four rate cuts starting in June. Powell needs to send a policy signal Fed Chairman Powell will bear the responsibility of explaining the policy direction at the press conference after the meeting. "More complicated, the Fed itself is not yet sure what to do in June," Reinhart pointed out, "So Powell must say 'everything is under consideration.' Although he always says that, this time he must truly mean it." Powell will also likely be asked about recent economic data, although consumer and business confidence is generally pessimistic, these sentiments have not yet fully reflected in hard economic indicators such as spending and employment. The annualized growth rate of US GDP in the first quarter was -0.3%, but this was mainly due to a significant increase in imports by businesses before the tariffs took effect on April 2. Employment remains robust. Non-farm payrolls increased by 177,000 in April, exceeding market expectations. However, survey data from the manufacturing and service sectors show that businesses are deeply concerned about the supply chain effects of inflation and tariffs, consumer confidence has dropped to multi-year lows, and inflation expectations have risen to multi-decade highs. All of this means that the Fed will need to walk a tightrope between various pressures from now until June. "No dot plot" in this meeting "At this meeting, the Fed will emphasize 'patience' in its statement and press conference, continuing to observe more data," said Tony Rodriguez, head of fixed income strategy at Nuveen. "It's not appropriate to take action now, but once signs of weakness in the job market begin to show, we must prepare to take action." Nuven expects two rate cuts this year and two more next year to address the economic slowdown and price increases caused by tariffs. "We expect this meeting will not result in any action. They need more hard data, which may only be clear by June or July. The September meeting may be the time for the first rate cut." In this meeting, the Fed will not update its economic forecast or release a "dot plot" reflecting members' rate expectations, which will be announced at the June meeting. Therefore, after this FOMC meeting, any adjustment in policy attitude will mainly be reflected in the wording of the statement and the press conference by Powell. Goldman Sachs economist David Mericle said in a report, "We believe that it will take several more months of data to provide enough evidence to support a rate cut." Goldman Sachs expects the Fed to cut rates in July, September, and October to prevent further economic slowdown, even if this may temporarily heat up inflation. Trump pressures the Fed again A possible "black swan" factor is President Trump. As he did in his first term, he recently called on the Fed to cut rates to address inflation approaching the central bank's 2% target. However, Reinhart believes that the Fed will not yield to pressure from the President, nor will internal divisions arise due to public statements from some members. "To a certain extent, White House pressure actually helps Powell maintain committee unity," Reinhart stated, "because when the 'family' is under attack from the outside, internal members usually criticize each other less. Would you openly criticize Powell and stand with the President in this situation? If you are an official who has worked within the Fed system for a lifetime, the answer may be no."