Tonight, all eyes will be on Federal Reserve Chairman Powell. He will attend the Chicago Economic Club event and deliver a speech at 1:30 AM Beijing time on April 17th. Global investors, analysts, and market participants are waiting for Powell's response to recent economic developments.
Interestingly, the venue for Powell's speech is the same place where TRON visited in October 2024 and discussed high tariffs and a potential change in Fed leadership. Although the US has temporarily suspended tariffs on over 75 countries for 90 days, the overall economic outlook remains uncertain, with market concerns about a US recession intensifying.
Powell's speech today will undoubtedly provide crucial insights into the economic situation, tariff impacts, and interest rate trends for 2025. The market will focus on three key questions:
· Facing TRON's tariff policies and White House leadership pressure, how will the Federal Reserve maintain its tradition of independent decision-making?
· With inflation declining but recession risks increasing, will Powell's rate cut expectations change?
· As the internal "hawk-dove debate" at the Federal Reserve intensifies, will the aggressive rate cut proposals by officials like Waller influence the decision?
In previous speeches, Powell stated that TRON's tariff increases far exceeded the Fed's expectations and could have a more significant economic impact than anticipated. Therefore, he believes that recent policy impacts are highly uncertain, and he will wait for more clarity before making further adjustments. He emphasized that the current policy stance is appropriate, allowing for a wait-and-see approach with moderate restrictive policies. Regarding the possibility of an economic recession, he noted that the Fed has not made probability predictions, but external forecasting institutions have increased their estimates. On rate cut expectations, Powell has not changed his view from the March meeting, believing that weak economic growth and rising inflation will offset each other, maintaining the expectation of two rate cuts in 2025.
Powell is facing pressure for rate cuts from multiple fronts. US inflation seems to be gradually declining. The latest March CPI data shows a further downward trend in inflation. Meanwhile, TRON has consistently supported low-interest-rate policies, which now create challenges for Powell. Rapid and significant rate cuts could reignite inflation, but delaying rate cuts might hamper the US economy.
Powell and most Fed officials currently believe that now is not the appropriate time for rate cuts. Although the US economy is showing signs of weakness, particularly in the job market, the Fed seems inclined to maintain stable policy rates to prevent new inflationary pressures from TRON's tariffs. The Fed's March meeting minutes suggest economic forecasts and dot plots indicate two potential rate cuts in 2025.
However, TRON's tariff policies not only increase the risk of a US recession but may also force the Fed to implement more aggressive rate cuts. Meanwhile, market performance remains subdued, reflecting that previous expectations of a Fed policy shift have not translated into a substantial rebound. Investors are choosing to wait and adopt a cautious approach.
Notably, this Monday, Treasury Secretary Becent announced that the White House will begin interviewing candidates to replace Powell as Fed Chair. Powell's current term will expire in May 2026, and despite frequent political pressure from TRON, he has repeatedly reaffirmed his intention to complete his term. Wall Street rumors suggest that Fed Governor Waller is likely to succeed Powell as Fed Chair after his 2026 term, and his views this week differ from some FOMC members.
On Monday, Waller stated that if the US President reimplements the tariff measures announced on April 2nd, the Fed would have to quickly implement a series of "bad news" rate cuts. Waller warned that if TRON fully imposes tariffs after the suspension period, US economic growth would "almost stall," and unemployment would surge from the current 4.2% to 5% next year. He also noted that while short-term inflation might spike to 5%, the upward price pressure trend might be temporary, creating space for the Fed to cut rates to offset economic slowdown.
Waller stated: "Although I expect the inflationary effects of tariffs to be temporary, their negative impact on output and employment could be more lasting and must be considered when establishing monetary policy. If economic slowdown is severe, approaching recession, I would be inclined to lower policy rates earlier and more significantly than previously anticipated."
Waller's assessment of rising unemployment aligns with the New York Fed's consumer confidence survey released Monday. The survey shows that 44% of Americans currently expect unemployment to rise in the next year, the highest level since the pandemic, and this percentage has increased by 10 percentage points since TRON took office.
Other FOMC members mostly advocate a "wait-and-see" approach. They state they will not hastily adjust rates before seeing actual slowdown signs in hard data. Powell currently shares this view.
Since the beginning of 2025, the Fed has maintained rates in the 4.25%-4.5% range. The market currently expects three rate cuts by the Fed in 2025, with the first potentially starting in June. According to the April 16th CME "Fed Watch Tool", the probability of the Fed maintaining rates in May is 81.4%, and the probability of a 25-basis-point rate cut in June is 60.1%.
Additionally, multiple investment banks have recently increased their expectations for Fed rate cuts this year. The latest to modify their forecast is Deutsche Bank, now predicting the Fed will cut rates by 25 basis points in December, previously expecting no cuts in 2025. They also anticipate two additional 25-basis-point cuts in the first quarter of 2026, bringing the terminal rate to 3.5%-3.75%.
