Will Fed Chair Powell cut rates on May 7 under Trump’s pressure?

The US Federal Reserve is expected to keep interest rates unchanged on May 7, resisting pressure for cuts despite tensions with US President Trump. The central bank is likely to maintain the benchmark rate at 4.25% to 4.5% despite Trump’s demand for rate cuts since January.

Fed Chair Jerome Powell may find support in Friday’s government data, which revealed a robust 177,000 increase in April payrolls. A steady labour market gives the Fed room to hold rates unchanged, even as inflation shows signs of cooling. While the Fed’s preferred inflation gauge suggests that price pressures are gradually easing, new US import tariffs could threaten to undo some of that progress.

Economists predict no rate cut

Bloomberg economists Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou, and Chris G. Collins noted that expectations for rate cuts have waned after the jobs report. “We expect Powell to push back against market pricing and signal a renewed priority on price stability,” they said. “Officials like Richmond Fed President Thomas Barkin and Fed Governor Adriana Kugler have voiced concerns that inflation expectations may be loosening. Add to that the solid April payroll print and there’s little pressure for a near-term cut.”

Rate cuts across regions

Across countries, central banks are taking varied approaches to monetary policy. The European Central Bank continues to lower rates, anticipating weaker growth and disinflation from the impact of US tariffs. However, a Friday report showed euro-area inflation held steady, with a key underlying measure even rising.

Across the globe, markets are bracing for several monetary decisions. Rate cuts are anticipated in the UK and Poland, while Brazil may opt for a hike. Sweden and Norway are expected to hold rates steady. On Friday, attention will shift to China’s trade data for April—the first full month since the US announced its “Liberation Day” tariffs and Beijing responded with retaliatory measures.

The Bank of England is expected to lower borrowing costs on Thursday. “Armed with forecasts that take account of Trump’s tariff onslaught, officials will probably ease despite price pressures that have kept inflation noticeably above 2%,” analysts said.