Long-awaited FOMC rate cut may not happen until Q4, says ING
The Fed's long-awaited rate cut may not happen before the fourth quarter, according to ING
The investment bank noted that the delayed rate cut could be sharper when it finally comes.
Omkar Godbole | Edited by Sheldon Rebeck May 8, 2025, 1:19 pm
Key points:
- The Federal Reserve left its key interest rate at 4.25% to 4.5% on Wednesday, with no immediate plans for a cut.
- Federal Reserve Chairman Jerome Powell noted heightened economic uncertainty and risks of rising unemployment and inflation.
- ING suggests the Fed's cautious approach could delay rate cuts, which could be sharper when they happen.
The Federal Reserve is unlikely to cut interest rates anytime soon, but when it does, the easing could be sharp, according to Dutch investment bank ING.
The Fed left its benchmark rate at 4.25% to 4.5% on Wednesday, with Chairman Jerome Powell citing the threat of stagflation at a press conference after the announcement.
Both crypto and traditional markets had been expecting Powell to hint at a possible rate cut in June, with ING citing his comments that “uncertainty over the economic outlook has increased” and “risks of rising unemployment and inflation have increased” as evidence that the wait-and-see mode could extend for several more meetings.
The comments indicate “little appetite for action until they are confident in the direction the data is heading, suggesting a rate cut could be delayed but there is a risk it will be sharper when it does come,” ING said in a client note.
The investment bank noted that the wait-and-see approach could “continue until September.”
The Fed's slowdown is likely due to concerns that the trade war and supply problems at ports and logistics companies could put pressure on inflation.
Bitcoin rose from $96,000 to $99,5000 after the Fed's decision on Wednesday, and President Donald Trump's promises of a trade deal with a major economy helped revive risk appetite.
