CB Views: May 2025 FOMC Preview

Scenario 

Probability 

Assessment

Hawkish Message

30%

• Presser: If the goal is to elongate the business cycle, we think the Fed should be preemptively easing, but if Powell reiterates a “wait & see” approach and dismisses Q1 GDP, that’s hawkish.
• Market Implication: As seen in the markets section, there has been a unconvincing rebound in markets post liberation day, if Powell is uncharacteristically hawkish, there will be “no place to run, no place to hide” (however USD might find finally support).

Neutral Message 
Base-Case (but leaning hawkish as per above)

50%

• Statement: The recent FOMC statement changes resulted in the removal of a “roughly” balance of risk assessment to stating that “uncertainty” around the economic outlook has increased. Given that liberation day/trade-policy shifts have only further amplified uncertainty, this statement should keep on message.
• Presser: Confident economy solid enough to weather recent vol
• Market Implication: Markets want Fed liquidity and an attempt by the Fed to offset tariff shocks, the longer the Fed waits to signal such a pivot, the greater the disappointment for markets.

Dovish
Message

20%

• Statement: Starts to highlight labor market conditions softening (based on what is seen in surveys and the Fed’s Beige Book).
• Presser: Highlights more of the mounting growth concerns vs inflation. Starts to list what the Fed could do to offset recession.
• Market Implication: Bull steepener, stocks back in a rally mode.