'The waiting is the hardest part'

Federal Reserve Chair Jerome Powell could have been channeling Tom Petty at the FOMC meeting last week, in particular, the Heartbreakers’ hit, “The Waiting Song.” In the process of explaining in his press conference that the uncertainty of tariffs and other factors has caused the Fed to be patient before making any policy changes, he apparently used  the word “waiting” 20 times. That’s actually more than the Petty song. In any case, the markets got the picture that the benchmark interest rate might stay at 4.25-4.5% for some time.

Powell was unwilling to even tip his hand as to the direction or timing of the next move. Although the soft economic metrics have been weakening, as evidenced by declining surveys and sentiment indicators, the  hard data of the US economy has been resilient. In all, Powell said that the economy is in a “solid position” and able to withstand this level of interest rates. Investors, businesses, and the Fed will continue to seek clarity on the impact of trade policy and the overall health of the economy. The waiting indeed goes on.

Other economic data from last week included initial jobless claims, which fell slightly to 228,000, from 241,000 the week prior and nearly right on the 12-month average of 227,000. Additionally, the ISM Services PMI, which measures business activity in the services sector, increased slightly to 51.6 in April, from 50.8 in March. It has bounced between 49.2 and 55.8 since the start of 2023.