The markets are awaiting the Federal decision in the Trump storm

An economic report said that the world is awaiting the federal reserve decision next Wednesday, amid fears of the repercussions of the customs duties of US President Donald Trump on inflation and growth, and in light of expectations of 94.8% to install interest at 4.5%.
The markets witnessed severe turmoil, with the decline in the dollar, the rise of gold, and the collapse of stock indicators, while the meeting comes at a critical timing with the decline in domestic product and high unemployment.

Federal meeting

The US Federal Reserve is scheduled to hold the open market committee meeting on Wednesday, May 7, 2025, amid widespread expectations of installing interest rates within the current range of 4.25%-4.50%.
According to the CME Group, which monitors the possibilities of interest moves based on futures, the probability of keeping the interest unchanged is currently 94.8%, compared to a possibility not exceeding 5.2% to reduce 25 basis points.
According to the report, since the federal began to transform it in monetary policy in September last year, interest rates have been reduced by a total of 100 basis points, to remain stable since the end of 2024.
He added that the situation has changed significantly since then, especially in light of the fierce protectionist policies that President Donald Trump has pursued, which included imposing customs duties on a group of countries, which raised fears of world trade disruption.

He pointed out that these policies prompted the federal reserve to raise its expectations for inflation during the years 2025 and 2026, in exchange for reducing his expectations for growth.

Correction

The report said: “The market response came fast, as a state of reluctance prevailed in the risk, which prompted the stock markets to a wave of correction and the decline in the US dollar, while gold witnessed a historical increase in a growing demand for safe assets.

Since assuming the position, Trump practiced repeated pressure to reduce interest rates, and threatened in one of the stages to dismiss the Federal President Jerome Powell before the end of his term, which raised questions about the independence of the central bank. However, the president recently returned to reduce his statements, stressing his lack of intention to isolate Powell, noting that he is likely to be allowed to complete his period, in reference to the continued independence of monetary policy.
On the economic level, the image does not seem bright for the American economy; The consumer confidence index issued by the “Business Council” for April has declined to 86 points, which is the lowest level since the pace of 2020.

GDP

The gross domestic product shrinks 0.3% during the first quarter of 2025 on a quarterly basis, while the Chicago Procurement Manager Index came at 44.6 points, without expectations.
As for the Federal Federal Inflation Index, which is the basic personal consumption price index, it has settled unchanged on a monthly basis, contrary to expectations of 0.1%.
On the labor market level, job opportunities decreased according to the Gouls report for the month of March to 7.192 million opportunities, compared to expectations at 7.490 million, while the ADB job report in the private sector showed only 62 thousand jobs during April, compared to expectations of about 114 thousand.
The number of initial unemployment subsidies increased to 241 thousand requests, exceeding 224 thousand estimates.
Until April 30, future interest rate contracts indicate four potential reductions by the end of the year, which may push the final interest rate to a level of approximately 3.31%. However, the issuance of positive data recently – especially the non -agricultural job report, which recorded 177 thousand new jobs compared to expectations at 138,000 – led to an amendment to the path of expectations, so that the markets are now likely to implement almost three reductions, equivalent to a decline of 0.8% in the interest rate, to reach about 3.51% by the end of 2025.
The report stated that although the Trump administration showed a relative openness to trade negotiations, especially with China, the economic fog is still ongoing.

Inflationary pressure

According to the report, the federal appears to be in an accurate position, as it must reconcile an expected inflationary pressure due to customs duties, and slow growth indicators that may affect the labor market later.
Currently, the central bank continues to follow the “waiting and exclusion” approach, with weighting of resuming interest reduction as of July.
According to the report issued by “Senchrey Financial”, the Emirates Central Bank is expected to keep pace with the Federal Decisions this week, in light of the dirham link to US dollars.
He added that if the interest is installed, it is likely that the central bank will be kept on the “basis price” applied to the one -night manner (ODF) without change, in line with the federal orientation.
This price associated with the rate of return on the Federal Reserve (IORB) is a major indication of monetary policy trends in both countries.