The US president said today that the US economy is in a transitional stage, citing his employment indicators and his tariff plan, while reiterating his call to cut interest rates.
“We’re just in a transitional stage, as soon as we start!” He emphasized in a post on Truth Social.
The post was followed by publication of data showing a marginal slowdown in increased employment in April.
On May 6-7 the Fed meeting
The forthcoming meeting of the US Federal Bank (FED) on May 6-7 is expected to be a critical test for the recent US stock rally, as investors hope for clear signals to reopen interest rates in the coming months.
The Stock Exchange has recovered dramatically, eliminating the losses caused by President Donald Trump’s extensive duties, with the S&P 500 remaining almost unchanged since the beginning of April, when duties have caused strong fluctuations.
Expectations and uncertainty about interest rates
The Fed is widely expected to keep interest rates unchanged at 4.25% -4.5% at Wednesday’s meeting, with markets estimating a possible decline from June onwards, although chances have declined after strong April employment data. Purchases discount at least three interest rate cuts by 25 basis points by the end of 2025, with expectations slightly limited due to labor market resilience.
As Morningstar Wealth’s Dominic Pappalardo notes, “Fed is one of the few tools that can support the market immediately. If it begins to show that inflation concerns are receding, this will be interpreted as an approach to interest rates and will be positively accepted by markets. “
Trump duties and fed dilemma
Trump’s duties are a key factor in the Fed’s decisions, as officials are called upon to balance between fears of slowing the economy and the likelihood of duties that boost inflation. Recent data has shown a shrinking of the economy in the first quarter of 2025, for the first time since 2022, a development that many analysts attribute to increased imports for higher duties.
The Fed holds a “waiting” stance, as the president has stressed that more data is needed to assess the duration and size of the duties inflation. At the same time, the revision of Fed forecasts shows higher inflation for 2025 and lower growth.
Despite pressure and uncertainty, corporate results remain strong, with the profits of S&P 500 companies exceeding 7.4% expectations, compared to 4.3%. Investors are expecting further developments on the trade front, as temporary suspension of duties in many countries for 90 days has boosted the investment climate.
