Fed hold expected as focus turns to Powell's final months

Economic Outlook - The Federal Reserve is expected to keep interest rates unchanged, with a benchmark rate in the 3.50% to 3.75% range, as investors focus on Chair Jerome Powell's guidance amid resilient economic growth and easing inflation pressures [1][2] - Recent US economic data has shown positive surprises, with unemployment at 4.4% and fourth-quarter GDP growth tracking above 5.4%, complicating the case for near-term rate cuts [2][3] - The Fed faces a "tricky economic outlook," balancing strong growth and persistent inflation, while considering the potential impact of artificial intelligence on productivity and price pressures [3] Market Expectations - Markets are pricing in less than a 3% chance of a rate cut at the upcoming meeting, although there are expectations for cuts later in the year [1][4] - Analysts anticipate that the Fed will remain on hold for the remainder of Powell's term, with Deutsche Bank predicting only one rate cut in September [6][7] - Equity markets are reaching record highs based on expectations that inflation will continue to cool, despite the Fed's anticipated decision to maintain current rates [4] Policy and Political Considerations - Analysts expect Powell to address not only the economic outlook but also legal and political pressures on the central bank, including recent Justice Department subpoenas and questions about his successor [8] - The Fed is likely to adopt a cautious tone, emphasizing data dependence amid a complex economic and political backdrop [10]