Vince Golle and Craig Stirling

Sat, May 24, 2025, 1:00 PM8 min read

(Bloomberg) --

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The Federal Reserve may take comfort that tariffs have yet to materially boost official inflation readings, but policymakers will continue to suggest interest rates are on hold until they better understand the coming impact of US trade policy.

Figures on Friday are projected to show the US personal consumption expenditures price index excluding food and energy — the Fed’s preferred gauge of underlying inflation — probably rose 0.1% in April after no change a month earlier, based on a Bloomberg survey.

While the impact of President Donald Trump’s tariffs on April price data will be modest, the trade-policy fingerprints are expected to become more apparent as soon as next month, according to many economists. And with the job market showing few signs of outright stress, Fed officials are content to keep interest rates steady until trade policy changes are reflected in the data.

Wednesday’s release of minutes from the Fed’s meeting earlier this month may reinforce that approach, as could speeches from regional Fed presidents including Neel Kashkari and John Williams. Chair Jerome Powell gives baccalaureate remarks at Princeton University on Sunday.

At the same time, US economic growth is expected to cool over the course of the year, with many businesses becoming more guarded about the outlook as tariffs boost costs and weigh on consumer sentiment. The government’s price figures will be accompanied by a fresh read on household demand.

Economists anticipate outlays for goods and services rose 0.2% in April after a 0.7% March advance, excluding the effect on inflation. That indicates more restrained household spending at the start of the second quarter, a reflection of growing anxiety about personal finances and the labor market.

What Bloomberg Economics Says:

“In spite of the subdued inflation and spending, FOMC officials likely will signal they intend to stay on hold for an extended period. The common message from the slew of FOMC participants set to speak in the coming week — including Fed Chair Jerome Powell — will be that policymakers will ensure inflation expectations stay anchored.”

—Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou & Chris G. Collins, economists. For full analysis, click here