As expected, the U.S. Federal Reserve concluded its meeting yesterday without changing its trendsetting policy interest rate.

Holding the overnight rate steady at a range of 4.25 to 4.5%, this was the third meeting in a row without a rate cut. The next decision from the Fed will come on June 18.

Market expectations, according to CME FedWatch, suggest a cut at the June meeting is also unlikely, but with three 25-point cuts coming by the end of the year.

After backing down from earlier threats to fire Fed Chair Jerome Powell, President Trump renewed his criticism this morning for not lowering the policy rate.

Why wait? There are no doubt headwinds from tariff threats, creating tremendous uncertainty, lower consumer confidence and putting upward pressure on inflation.  However, the hard (albeit lagged) data on the economy has not yet shown a material deterioration. As Powell put it, “the economy is doing fine.” GDP did contract in the first quarter, but that was largely due to a temporary surge in imports to get ahead of the tariffs. The labour market has held up reasonably well. According to the statement released after the meeting:

“Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”

The Fed is in a tricky spot. It has a dual mandate of maximum employment and stable prices. Tariffs weaken growth (pointing to a rate cut) and raise prices (pointing to a higher rate). Powell talked about this tension in a post-meeting news conference.

For now, the Fed seems content to wait and see how this all shakes out in the economic data. In other words, it is going to “wait for greater clarity” before committing to a course of action.

Closer to home, the Bank of Canada is also in ‘wait and see’ mode. Like the Fed, it is weighing the risk of higher inflation from tariffs against the economic slowdown they will cause. However, the Bank of Canada has been much more aggressive than the Fed in slashing its policy rate (see the chart below) as it deals with a weaker economy and inflation near target. We believe the Bank of Canada is near the end of its rate-cutting cycle. However, with a softer economic outlook, we still see the Bank cutting further from its current level of 2.75% to 2% by the end of the year. The next Bank of Canada interest rate announcement is scheduled for June 4.

Answer to the previous trivia question: The diameter of the Trans Mountain pipeline varies from 24 inches (the original pipeline) to between 30 and 42-inch pipe used for the expansion project.

Today’s trivia question: How many times a year does the Federal Open Market Committee of the U.S. Federal Reserve meet to review economic conditions and determine the appropriate stance of monetary policy?