Is This the Calm Before the Tariff Storm? Fed Pauses as Inflation Slows

Investors got some good news heading into the week: inflation is still under control, for now. New data expected Friday shows the Federal Reserve’s favorite inflation gauge, core PCE, likely rose just 0.1% in April, following a flat reading in March. That’s a sign that price pressures aren’t building rapidly, giving the Fed more reason to keep interest rates steady.

No Action Is the Best Action

President Trump’s new tariffs, announced in April, haven’t fully affected the data yet. Economists say their impact will start showing up as early as next month, and that could change everything.

For now, though, the Fed appears content to wait and watch. With consumer spending slowing up just 0.2% in April after a stronger March, and the job market still healthy, Fed officials are signaling they’ll stay on pause. That’s likely to be the message from several speakers this week, including Minneapolis Fed President Neel Kashkari, New York Fed President John Williams, and Chair Jerome Powell, who speaks Sunday.

The big question is what happens next. If tariffs begin to push prices higher, the Fed might be forced to act — or at least change its tone. That could spook markets, especially after a strong rebound in recent months.

Rate Cuts Are Expected Globally

Globally, the picture is shifting, too. Central banks in South Korea and New Zealand are expected to cut rates this week, while the European Central Bank is gearing up for a possible rate cut in June. Inflation is slowing across major eurozone countries — a good sign for investors betting on easier money ahead.

Other key reports this week in the U.S. include revised Q1 GDP, durable goods orders, and consumer confidence. Together, they’ll give a clearer picture of whether the economy is truly cooling or just catching its breath.

What TipRanks Readers Should Watch:

Inflation is tamed for now, giving markets some breathing room. However, with global growth cooling and trade tensions looming, the second half of 2025 may be more volatile. Savvy investors will focus on fundamentals, watch the Fed closely, and position defensively in sectors with pricing power and strong analyst support.