5/9/25: Markets Keep Steady on FED Hold and Trade Optimism.
May 9, 2025 | Weekly Highlights

Economic data was light this week, as the market’s attention was focused on the Federal Reserve Open Market Committee (FOMC) meeting and ongoing talks between the Trump administration and key trading counterparts.
The FOMC kept interest rates on hold on Wednesday, as expected, at a target range of 4.25-4.50%, with Chair Powell once again emphasizing the Committee’s ‘wait and see’ approach amidst an uncertain macro environment where economic data continues to show resilience while concerns over a tariff-led increase in unemployment and inflation remain elevated. Indeed, during the week the ISM Purchasing Managers’ Services Index, a key gauge of activity in the largest sector of the US economy, continued to show expansion, while weekly jobless claims declined from the prior week to a benign level of 228,000, indicating a still solid labor market.
On the trade front, the first deal was announced with the United Kingdom on the 80th anniversary of Victory in Europe Day. The UK will lower tariff and non-tariff barriers on US products, most notably beef and ethanol, and buy more airplanes from Boeing, while the US will lower tariffs on autos and steel while keeping a 10% baseline rate on UK imports. The deal is more symbolic for the US as the UK accounts for just 4% of exports, but a positive development, nonetheless.
More importantly for the US economy, Treasury Secretary Bessent will travel to Switzerland this weekend to meet with Chinese officials and begin trade negotiations. As talks progress the market is looking for tariffs on imports from China to come down significantly from the current 145% level.
The overall market tone was positive this week, equities continue to recoup their losses and credit spreads narrow post Liberation Day, while Treasury yields were broadly unchanged. We still expect the Fed to engage in a modest amount of easing this year which should support front end rates and a steep yield curve.
Next week: CPI, Retail Sales, PPI, Initial Jobless Claims, Continuing Claims, Industrial Production, NAHB Housing Market Index, Housing Starts, Building Permits, Import and Export Price Index, University of Michigan Index.
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