Fed-O-Meter

Our Fed-O-Meter gives you a monthly snapshot of where we see the Fed moving on monetary policy. Dive deeper by reviewing the numbers behind the needle and our summary analysis below.

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Higher Chance of
More Conservative
Fed Policy
Higher Chance of
More Aggressive
Fed Policy
Research & Insights Fed-O-Meter

Summary Analysis

The economic expansion has advanced from the initial recovery, and the focus is now on metrics the Federal Reserve is looking at to gauge the health of the economy. Since the Fed’s dual mandate is to keep prices stable and maximize employment, we will focus on labor and inflation metrics, keeping in mind the broader economic impact as well. We created a Fed Monitor to track some of the data points that will impact the Fed’s decisions to tighten financial conditions. Additionally, we try to quantify the data and information outside of the dashboard to determine if the Fed is being more dovish than the data, and likely to be more aggressive in the future, or if they are being hawkish relative to the data, and likely to be more conservative in the future.

Federal Reserve (Fed) Chair Jerome Powell has been adamant about holding interest rates at current levels until there is greater clarity around tariffs and their impact. While tariff-induced price pressures may keep the Fed on the sidelines in the near term, the risk of slower economic growth could lead to rate cuts as early as this summer.

Tariffs are an upside risk for inflation in the months ahead, but inflationary pressures have cooled. As of March, headline CPI moderated to 2.4% year-over-year (Y/Y), while core CPI (excluding food and shelter) slowed to a 4-year low of 2.8% Y/Y. Easing shelter inflation, a significant component of CPI, has provided a tailwind for overall cooling inflation trends. The labor market remains stable, with an average of 152,000 new jobs added monthly in the first quarter. Although the unemployment rate ticked up slightly to 4.2%, jobless claims remain historically low, suggesting underlying labor market resilience.

The Fed needs greater clarity on tariffs before making monetary policy adjustments. Although a rate cut in May appears unlikely, futures markets anticipate potential rate cuts this summer due to the economic downside risks posed by tariffs. The Fed-O-Meter remains unchanged for now.