From Yahoo Finance: 2025-05-12 13:10:00

The Federal Reserve is taking time to assess the impact of Trump’s tariff strategies on the economy after a pause in reciprocal levies between the U.S. and China. Traders predict no rate cut until at least September, following a weekend agreement to lower tariffs and continue discussions for 90 days.

The surprise agreement between the U.S. and China opens up $600 billion in two-way trade and eliminates the risk of a U.S. recession this year. Fed Chair Powell emphasized the need for clarity on tariffs before making any changes to interest rates.

The likelihood of a Fed rate cut has been pushed back to September, with traders reducing the overall outlook for rate cuts in 2019. Inflation pressures may continue due to current tariff schedules, impacting the U.S. dollar and Treasury note yields.

Economists anticipate a Consumer Price Index report for April to show increased inflation levels, driven by Trump’s recent tariff actions. Positive headlines and data will continue to influence global rates, with upward pressure expected to persist until told otherwise.

Read more: Fed rate cut bets hammered by U.S.-China tariff truce