The Federal Reserve is being cautious about changing interest rates due to uncertainty surrounding inflation and the impact of President Trump’s economic policies. Indeed, Governor Michelle Bowman wants to see more evidence that inflation is decreasing before making any changes. It is worth noting that the current inflation rate remains above the Fed’s 2% target, and believes that upside risks are still there.
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This is because the current unemployment rate is below her estimate of full employment, which is when nearly everyone who wants a job can find one, with only a small percentage of people being temporarily between jobs. This could be a problem if her estimate is correct because it would mean that the labor market is too tight and could lead to wages that rise too quickly.
Fed President Harker Is a Little More Optimistic
On a positive note, Patrick Harker, President of the Federal Reserve Bank of Philadelphia, believes that the U.S. economy is strong and resilient. He expects inflation to decrease over time and return to the target rate of 2%. Harker also pointed out that the economy is growing steadily, and the jobs market is balanced, which suggests that he does not think it is below full employment.
For now, the Federal Reserve is expected to keep interest rates steady at its next meeting in March. It is taking a wait-and-see approach to understand how President Trump’s policies, including import tariffs, will affect inflation. By holding interest rates steady, the Fed can continue to monitor the economy and make adjustments as needed.
Is SPY a Buy Right Now?
Using TipRanks’ technical analysis tool, the indicators seem to point to a positive outlook for the SPDR S&P 500 ETF Trust (SPY). Indeed, the summary section pictured below shows that 15 indicators are Bullish, compared to two Neutral and five Bearish indicators.
