The Fed's Dilemma: Waiting For Hard Data Amid Political Pressure

2025-05-09 23:25:00 ET

Summary

• The Fed has emphasized the need to wait and see if the weakness in soft data translates into weakness in hard data.
• Investors should prepare for a higher-volatility environment marked by fragile rate expectations, increased market sensitivity to Fed signals, and renewed pressure on the U.S. dollar.
• Rate cuts will be required but, increasingly, they will need to wait until late Q3 before the window of opportunity opens.

By Christian Floro, CFA, CMT, Market Strategist

The Fed has emphasized the need to wait and see if the weakness in soft data translates into weakness in hard data. They are beholden to trade policy - itself incredibly uncertain - and are now likely to delay further rate cuts until late Q3....

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