What to take from the May 2025 FOMC Minutes

[Redator]

Powell laid out in his post-meeting press conference and what has already been echoed in recent speeches by other Fed officials. Persistent uncertainty around trade policy, risks to both sides of the Fed’s dual mandate (employment and inflation), and the ongoing debate about which side presents the greater medium-term risk are keeping the FOMC in wait-and-see mode.

So far, nothing in the incoming data through early May appears to have shifted the Fed’s stance or prompted a lean toward any specific policy path. Participants agreed that with growth and the labor market remaining solid, and policy already moderately restrictive, the Fed is well positioned to stay patient. The minutes note that heightened uncertainty warrants a cautious approach until the full economic effects of recent government policy changes become clearer.

A reminder on what the FED is waiting to cut

Those hoping for more concrete guidance will find little in these minutes. The Committee reiterated that future decisions would be guided by a broad set of data, the economic outlook, and the balance of risks. New York Fed President John Williams recently stated that clarity on the impact of tariffs likely won’t emerge until the June or July meetings, while Cleveland FED's Hammack and Atlanta’s Bostic (both non-voting members this year) suggested it could take until late summer or even three to six months to gather enough information.

For now, the Fed is keeping its options wide open. It is expected that to that we get 25bp rate cut in September, as labor market softness is expected to outweigh residual inflation concerns by then. While uncertainty around policy shifts clouds the forecast, we believe the current market pricing—reflecting only about a 45% chance of a cut by September—is underestimating the likelihood of easing.

DXY Intra-Day Chart

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DXY 1H Chart, 28 May. Source: TradingView

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The FOMC Minutes did not add much to the volatility as the DXY is consolidating just below the 100.00 Psychological Level.

Both the MA 20 and 200 are acting as support.

It is notable that the DXY broke out of the past week's descending channel.

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