The Fed is unlikely to loosen monetary policy while the economy is running hot, with Jerome Powell expected to cut rates only when something begins to break. Consumer spending data shows Americans spent an additional $133.9 billion last month, driving economic growth. The odds of the Fed maintaining its pause in May have risen from 40% last week to 59% today.
Key takeaways:
- The Fed is expected to hold out on rate cuts longer than anticipated due to strong consumer spending and market momentum, according to John Hancock strategist Emily Roland.
- Elevated interest rates have not yet created significant cracks in the economy or labor market.
- Riskier areas like crypto-related stocks and AI companies are gaining momentum in the market, with Bitcoin's price surpassing $51,000 and tech stocks like Nvidia seeing significant growth.
- The odds of the Fed maintaining its pause on rate cuts in May have increased from 40% last week to 59% today, according to the CME FedWatch Tool.