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The Minutes from the Fed’s May 6-7 meeting are scheduled for release on Wednesday.
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As anticipated, the Federal Reserve maintained its benchmark interest rate.
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Tariff-related worries put the US Dollar at risk of breaking its 2025 low.
The Federal Open Market Committee (FOMC) will release the minutes from its May 6-7 meeting on Wednesday. At that time, policymakers opted to keep the Federal Funds Target Range (FFTR) steady at 4.25%-4.50%, as widely expected by market participants.
Earlier this year, the Federal Reserve (Fed) adopted a more hawkish tone, largely driven by concerns over the potential impact of US President Donald Trump’s tariffs on economic growth and inflation.
The Fed not only maintained the benchmark interest rate but also gave no indication of upcoming rate cuts, continuing the cautious wait-and-see approach first signaled in March.
Fed officials express concern over rising risks
The Fed’s statement highlighted increased uncertainty around the economic outlook, noting that the Committee remains vigilant about risks affecting both employment and inflation targets. During the press conference, Chairman Jerome Powell emphasized, “We are comfortable with our policy stance,” adding, “Right now, the appropriate approach is to wait and observe how conditions evolve amid so much uncertainty.”
Additionally, the Fed has slowed the reduction of its securities holdings—another inflation-control measure—cutting the monthly Treasury roll-off from $25 billion to just $5 billion starting in April.
President Trump’s aggressive tariff policies have played a key role in the Fed’s hawkish outlook. Powell acknowledged that tariffs contribute significantly to higher inflation expectations, though he admitted it is challenging to precisely gauge their impact.
“Looking ahead, the new Administration is implementing major policy shifts in trade, immigration, fiscal policy, and regulation,” Powell said. “It’s the combined effect of these changes that will influence the economy and monetary policy.”
FOMC Minutes release and potential impact on the US Dollar
The FOMC Minutes will be published at 18:00 GMT on Wednesday, and market participants anticipate insights into the future direction of monetary policy. According to the CME FedWatch Tool, traders largely do not expect rate cuts in June or July, but there is roughly a 48% chance of a 25 basis-point cut by September.
The US Dollar is currently under selling pressure, with the US Dollar Index (DXY) comfortably below the 100.00 mark. Since the Fed is not expected to shift to a dovish stance, the Minutes are likely to confirm the current outlook, meaning their immediate impact on the DXY could be limited.
