As widely expected, the Federal Reserve left interest rates unchanged last week for the fourth consecutive meeting, keeping the federal funds rate in the 4.25%\u20134.50% range.<\/p>\n
Federal Reserve Chair Jerome Powell described the US economy as \u201csolid\u201d, noting that although GDP growth slowed slightly in the first quarter, private domestic demand remained strong. He highlighted that household consumption has been moderating, while business investment has shown a healthy recovery.<\/p>\n
Powell further noted that household consumption has been moderating, while business investment has recorded a healthy recovery. Regarding inflation, he stated that although it has declined significantly from its peak, it remains above the Fed\u2019s 2% target.<\/p>\n
The Fed Chair reiterated the central bank\u2019s commitment to its dual mandate, as well as to a data-dependent approach.<\/p>\n
As usual, the end-of-quarter meeting was accompanied by a new set of economic projections from the staff and an updated\u00a0dot plot<\/span><\/em>.<\/p>\n \n Both inflation (with core inflation revised upwards by +0.3 percentage points for this year) and unemployment (+0.1 pp in 2025 and +0.2 pp in 2026, to 4.5% in both years) were revised higher, while GDP growth was revised down by 0.3 pp for this year (to 1.4%) and by 0.2 pp to 1.6% in 2026, remaining unchanged for subsequent years. This scenario suggests a higher risk of stagflation, albeit with a resilient labour market.<\/p>\n These revisions may appear more significant than usual, but it is important to remember that the previous quarterly projections date back to March, i.e. before \u201cLiberation Day\u201d, when Trump announced his plans to impose reciprocal tariffs on all of his trading partners.<\/p>\n One interesting aspect to highlight is that, despite the upward revisions to inflation and the unemployment rate, the updated dot plot still points to two rate cuts by the end of the year. For 2026, the median projection now anticipates only one cut, compared with two projected in March, with an additional cut expected in 2027. The long-run policy rate remains unchanged at 3.0%. However, there was a\u00a0hawkish\u00a0<\/span>shift in the dot plot, which now shows that 7 of the 19 FOMC members favour no rate cuts this year, compared with 4 at the March meeting.<\/p>\n In addition, 8 of the 19 members indicate a preference for two rate cuts, implying a significant split among participants regarding the future stance of monetary policy. However, the Fed Chair downplayed the importance of the dots, stating that \u201cno one has a great deal of conviction in these rate projections.\u201d This comment is consistent with his view that recent data, particularly on inflation, do not yet fully reflect the impact of tariffs. \u201cEveryone I know is forecasting a significant increase in inflation over the coming months due to tariffs, because someone has to pay for them,\u201d he said, ultimately suggesting that policymakers\u2019 views may shift over time.<\/p>\n \n Finally, Powell reiterated the Fed\u2019s commitment to data-driven decision-making, suggesting that while rate cuts may be possible later this year, the current monetary policy stance\u2014considered moderately restrictive\u2014is, for now, appropriate and well positioned to address risks and uncertainty, signalling that the Fed is in no rush to adjust rates.<\/p>\n In summary, the Fed provided few indications as to when the next move will occur, and markets continue to fully price in one rate cut this year, with a high probability of a second.<\/p>\n \n \n This communication was produced by Banco Finantia for information purposes only and does not constitute an investment recommendation. In preparing this communication, no investment objectives, financial situations, or specific needs of investors were considered. Accordingly, the information was not tailored to any actual or potential investor, nor were any specific circumstances of such investors taken into account.<\/small><\/p>\n The information disclosed is based on market conditions prevailing at the time, as well as on information obtained from recognised third-party entities, which are public sources. Banco Finantia has not independently verified the data or information provided by those entities. As the recipient of this communication is aware of this situation, Banco Finantia cannot, under any circumstances, be held liable for any errors, omissions, or inaccuracies contained in this document or arising from the use of such information. Banco Finantia accepts no responsibility for any direct or indirect losses or damages that may be incurred by those who carry out transactions based on the information provided.<\/small><\/p>\n Banco Finantia\u2019s investment policy, whether acting on its own account or on behalf of its clients, is entirely independent of the content of this communication. The Banco Finantia Group may hold positions in, or trade, the securities or financial instruments referred to herein, before or after the issuance of this communication, and may also provide, or seek to provide, banking services to the issuers of such securities or financial instruments.<\/small><\/p>\n Banco Finantia\u2019s competent supervisory authority is the CMVM, with which it is registered under number 109.<\/small><\/p>\n","protected":false},"excerpt":{"rendered":" As widely expected, the Federal Reserve left interest rates unchanged last week for the fourth consecutive meeting, keeping the federal funds rate in the 4.25%\u20134.50% range. Federal Reserve Chair Jerome Powell described the US economy as \u201csolid\u201d, noting that although GDP growth slowed slightly in the first quarter, private domestic demand remained strong. He highlighted […]<\/p>\n","protected":false},"author":10,"featured_media":6839,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[93],"tags":[100,101],"class_list":["post-9869","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-articles","tag-corporate-banking","tag-fed"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.finantia.es\/en\/wp-json\/wp\/v2\/posts\/9869","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.finantia.es\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.finantia.es\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.finantia.es\/en\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/www.finantia.es\/en\/wp-json\/wp\/v2\/comments?post=9869"}],"version-history":[{"count":1,"href":"https:\/\/www.finantia.es\/en\/wp-json\/wp\/v2\/posts\/9869\/revisions"}],"predecessor-version":[{"id":10360,"href":"https:\/\/www.finantia.es\/en\/wp-json\/wp\/v2\/posts\/9869\/revisions\/10360"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.finantia.es\/en\/wp-json\/wp\/v2\/media\/6839"}],"wp:attachment":[{"href":"https:\/\/www.finantia.es\/en\/wp-json\/wp\/v2\/media?parent=9869"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.finantia.es\/en\/wp-json\/wp\/v2\/categories?post=9869"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.finantia.es\/en\/wp-json\/wp\/v2\/tags?post=9869"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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