The Federal Open Market Committee held the federal funds rate at 4.25-4.50% at its May 7 meeting, unanimous. This is the third consecutive hold following the 25bp cut in December 2025 and holds in January and March 2026. The post-meeting statement flagged “elevated uncertainty” from ongoing trade policy adjustments and noted that inflation has made progress toward the 2% target but “remains somewhat elevated.”
Chair Powell’s press conference offered no clear signal on timing for the next cut. He cited the incoming tariff impact on goods prices as a genuine wildcard: tariff-driven price increases are one-time level shifts, not ongoing inflation, but distinguishing that from second-round effects in real time is difficult. The Committee wants to see “a few more months” of core PCE data before moving.
Futures markets were pricing roughly 1.4 cuts before end of year after the statement, down from 1.8 before the meeting. The market’s implicit terminal rate for this cycle sits around 3.75%.