Wall Street Wants Jerome Powell’s Steer on Tariff Shock

It's decision day at the Fed and all eyes are on what it will mean for stock and bond markets.

With the Fed widely expected to hold its benchmark rate steady at 4.25%-4.50%, traders will be pouring over Jerome Powell’s comments for clues on whether President Donald Trump’s policies are prompting any change in the outlook for further rate cuts.

Expectations for lower rates have been faded as of late because of the strong US economy, particularly the last jobs report. Money markets currently price three quarter-point reductions this year, one less than at the start of April.

“The meeting will likely shape expectations more than usual as it is the first decision after the reciprocal tariff announcement,” said Erik Liem, a rates strategist at Commerzbank. “Verbal guidance will be key, as markets have postponed expectations” for monetary easing, he said.

But with economic growth expected to slow and US tariffs still in the cards and earnings season still underway, there are a lot of wildcards at play. In equities, options markets expect a one-day move of 1.1% for the S&P 500 Index after the meeting, according to data from Goldman Sachs.