FOMC Update - May 2025
May 7, 2025
Aligning with market consensus, the FOMC did not change its benchmark rate from 4.25%-4.50% for the third consecutive time. The Fed addresses “shifts in net exports” with no direct acknowledgement of the first negative real GDP print since 2022. The Fed further states that “the unemployment rate has stabilized and labor market conditions remain solid. Inflation remains somewhat elevated.”Rates and Market:
- Fed Funds Target: 4.25% – 4.50%
- Market Reaction: The S&P 500 had little impact while the UST 10Y ticked 4bp lower. The market is pricing a 24% chance of a 25bp rate cut at the next FOMC meeting.
The FOMC announced the following actions and analysis:
- Unanimous policy vote.
- The Fed stated that risks of higher unemployment and higher inflation have risen.
- The Fed noted they will continue monitoring economic information and are prepared to adjust monetary policy in order to meet their dual mandate goals of maximum employment and stable prices.