The Federal Reserve's decision to set the price, policy statement and Powell's statement will set the direction unless unexpected doves

Asian Handicap Market Review

On Tuesday, the US dollar index fluctuated downward throughout the day as the US trade deficit expanded to a record $140.5 billion in March. As of now, the US dollar price is 99.33.

Trump: Major announcements will be issued before the trip to the Middle East, and the content does not necessarily involve trade matters.

U.S. Kansas Fed Chairman Schmid will absent from the FOMC meeting, and Minneapolis Fed Chairman Kashkali will vote in place of Schmid.

International Financial Association: Global Debt Monitoring shows that in the first quarter of 2025, global debt grew by about US$7.5 trillion, breaking through US$324 trillion, a record high.

India-Pakistan Situation

① Indian armed forces launched Operation Sindur to attack multiple Pakistani locations. India said the operation was intended to combat terrorist infrastructure and was not targeted at Pakistani military facilities;

② Pakistan said that India fired missiles at Pakistani sites, and no Indian military aircraft entered Pakistani airspace during the attack;

③ Pakistani Defense Minister refuted the statement that India attacked terrorists;

④ Pakistani military: Pakistan and India exchanged fire in Pakistani-controlled Kashmir. Pakistan has launched ground and air combat operations and shot down two Indian fighters.

The situation in the Middle East

① Omani Ministry of Foreign Affairs: The United States and YeThe Houthi armed forces reached an agreement not to attack each other's ships to ensure smooth international merchant ships; ② Trump said that the Houthi armed forces were unwilling to go to war. Will believe that they promise not to blow up the ship. Stop air strikes on Houthi armed forces;

③ Senior Houthi armed officials did not confirm the news of a ceasefire with the United States, saying that they would continue to support Gaza and the attacks would continue;

④ The fourth round of Iraq-US nuclear negotiations may be held on May 11;

⑤ Trump: There is no plan to stay in Israel during his visit to the Middle East;

The Israeli army confirmed that the air strikes on Yemen, and airports, power plants, and cement plants became targets.

The U.S. trade deficit widened to a record high in March as companies increased imports of goods before imposing tariffs.

Tariffs

① It is reported that if the negotiations fail, the EU will impose tariffs on US goods worth 100 billion euros; ② If the UK and India reach a free trade agreement, India will cut tariffs on 90% of the UK imported goods, of which 85% will achieve zero tariffs within ten years; ③ British media: Britain and the United States will reach a trade agreement this week, intending to reduce tariffs on automobiles and steel ④Trump: It may renegotiate the US-Mexico-Canada Agreement.

Sultan declared the UAE a hostile country and cut off diplomatic relations with the UAE.

Summary of institutional views

ANZ Forecast May Federal Reserve Meeting: The Federal Reserve needs more time to evaluate the impact of recent tariff adjustments on inflation.

The Fed needs more time to assess the impact of recent tariff adjustments on inflation. As expected, inflation uncertainty has risen sharply, while broader economic uncertainty is seriously dragging down consumer confidence. Corporate confidence is also facing resistance.

The Fed's dual mission is to maintain price stability and achieve full employment. As long as the labor market remains resilient, this will allow the Fed to focus more on inflation, because in the medium term, price stability is crucial to achieving sustainable growth and full employment. We expect the upcoming policy meetings to adjust interest rates and we expect the Federal Open Market Committee to continue to prudently advance monetary policy adjustments.

Bank of America looks forward to the Federal Reserve meeting in May: Meetings seem to be transitional.

The FOMC meeting in May looks to be transitional. The policy interest rate remains unchanged, and the tone of Chairman Powell's speech will continue to continue recent statements. He may reiterate that the Fed is comprehensively evaluating the overall impact of all policy adjustments in the Trump administration rather than looking at trade policy in isolation. We believe that the threshold for a rate cut in June is high, but Powell is unlikely to rule out this option at this stage. The Fed is confident that if necessary, it will continue to guide the market through successive meetings to gradually digest the signal of canceling the expectation of rate cuts.

Karen Manna of Federated Hermes: Powell may not provide much clarity

Federal Chairman Powell may not be able to satisfy investment when he speaks to reporters after tomorrow's interest rate decisionthe desire for clarity. The Fed is expected to keep interest rates unchanged, and Powell may face issues of the impact of tariffs on inflation and the economy. The final level of tariffs and their duration remains unknown, which limits Powell's ability to provide more clear information. "Forecasting is always difficult, and making predictions with changing goals is almost impossible." She expects this uncertainty to continue until the Fed's June meeting unless there is any substantial change.

Barclays looks forward to the May Federal Reserve meeting: It will cut interest rates in the past two months this year and maintain a restrictive position

The Federal Reserve's May FOMC meeting may maintain policy interest rates at 4.25-4.50%, because the Federal Reserve needs to wait for the economic trend to become clearer in the context of rising policy uncertainty, implementation of new tariffs, rising short-term inflation expectations and worsening sentiment between households and businesses.

We expect the May FOMC statement and Powell to acknowledge that some short-term inflation expectations indicators based on market and surveys have risen, while household and business surveys show a decline in sentiment and an increase in uncertainty about the outlook.

At the press conference, we expect Chairman Powell to send out signals that FOMC is not in a hurry to adjust interest rates. He is expected to stress the need to keep long-term inflation expectations stable to ensure one-time price increases do not evolve into persistent inflation problems, and mentions that the Fed may take a balanced approach if the FOMC's dual goals conflict.

In our benchmark forecast, we expect FOMC to cut interest rates by 25 basis points in July and September this year, and cut interest rates twice again in 2026. By doing so, we believe that the FOMC will maintain a somewhat restrictive policy stance that will eventually gradually return to the target, but at the same time avoiding policy becoming too tight as the economy slows down and labor market deteriorates.

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