The Federal Reserve may have gained time to assess the impact of President Donald Trump’s tariff strategies on the U.S. economy following a pause in reciprocal levies between the U.S. and China. Traders now believe the Fed won’t lower its benchmark lending rate, currently at 4.375%, until at least September. The agreement, which reduces tariffs on Chinese goods to around 30% and U.S. exports to 10%, includes a 90-day commitment to maintain these rates while discussing economic and trade relations. This development likely reduces the risk of a U.S. recession by year’s end. Fed Chairman Jerome Powell warned that sustained tariff increases could lead to inflation, slower growth, and higher unemployment. Market expectations for rate cuts have shifted, with June’s likelihood dropping significantly. The U.S. dollar strengthened amid higher rate expectations and potential inflation impacts.
— new from TheStreet