Federal Reserve officials will have a challenging task on their hands at upcoming policy meetings as they attempt to balance the myriad of economic implications from President Trump’s tariffs.

Fears surrounding a US recession have ramped up a notch or two amid clear signs of a deterioration in economic news and sky-high trade uncertainty. While a downward revision to the 2025 GDP projection seems highly likely on Wednesday, we don’t think that Chair Powell will warn of impending trouble just yet, and he may pour cold water over the possibility of a sharp slowdown in the US economy.

With inflationary pressures elevated and the US labour market still performing quite well, we think that Powell will again stress that the Fed is in no rush to cut.

We expect the “dot plot” to show just two 25bp cuts in 2025, as it did in December, which would provide officials with flexibility to either slow or accelerate the easing cycle dependent on economic conditions.

In our view, both recession concerns and the recent repricing in Fed rate expectations have been excessive, which may open the door to a rebound in the dollar from current levels.

The information contained in this document was obtained from sources believed to be reliable, but its accuracy or completeness cannot be guaranteed. Any opinions expressed herein are in good faith, but are subject to change without notice. No liability accepted whatsoever for any direct or consequential loss arising from the use of this document.

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