This episode explores the Federal Open Market Committee meeting and the implications for interest rates. Against the backdrop of a still-solid US economy, despite a negative first-quarter GDP print largely attributed to inventory adjustments, the discussion pivots to the uncertainty introduced by recent trade developments. More significantly, the guests analyze the potential impact of these events on the Federal Reserve's policy decisions. For instance, New York Fed President John Williams's forecast of slower GDP growth, rising inflation, and a potentially higher unemployment rate is presented as an indicator of the Fed's thinking. The analysts expect the Fed to adopt a wait-and-see approach, prioritizing clarity on the inflation outlook before taking action, although a more hawkish stance than the market anticipates is considered a risk. In contrast to the market's pricing of significant rate cuts, the experts suggest that this is an average of various scenarios and that the actual outcome may differ. Ultimately, the conversation highlights the uncertainty in the market and the potential for a steeper yield curve as the year progresses, particularly given the anticipated increase in Treasury supply.
