Rick Rieder talked about the Federal Open Market Committee (FOMC) and the possibility of ending quantitative tightening (QT). He pointed out that the recent tariffs from Trump have not yet significantly affected U.S. inflation. He expects the Federal Reserve to take a careful, watchful stance on interest rates. In the next two months, the Fed is expected to learn more about how tariffs are impacting inflation. Right now, businesses are handling costs, but they might start passing those costs to consumers later. Rieder observed a slight dip in the labor market, suggesting the Fed could consider lowering rates at the September policy meeting. Rieder also speculated that the Fed may stop its quantitative-tightening measures, following a decision made in March to slow down the process. The FOMC statement will be released on Wednesday, June 18, 2025, at 1800 GMT, followed by a news conference with Federal Reserve Chair Powell thirty minutes later. Rieder’s comments show that policymakers might ease off from aggressively reducing the balance sheet, especially given the recent changes in the economy. Slowing down quantitative tightening means that while liquidity is still tightening a bit, it might not pressure asset prices as much in the short term. This is important for those monitoring sectors sensitive to interest rates. As past policy effects continue to unfold, future decisions may be more moderate. The delayed impact of tariffs on inflation provides some flexibility in pricing models. So far, companies seem to be absorbing the costs of tariffs. However, if companies start passing these costs to consumers more aggressively in the July or August data, it could limit the Fed’s opportunity to cut rates. Until this change is confirmed, rate futures are likely to show a mild easing bias, especially with no strong wage pressures or clear signs of inflation from consumer demand. While labor data has softened only slightly, there isn’t an immediate crisis, but the signs of some slack are significant. Even a small rise in jobless claims or slower job growth could change the outlook for the September meeting. If trends worsen by August, trading expectations may shift more dramatically, pressing the Fed to respond sooner. Rieder suggests a cautious Fed, observing closely rather than acting impulsively. For now, they are focused on remaining flexible. Major moves are unlikely without clearer indications, either from sustained price increases for consumers or noticeable job market weaknesses. Until then, any changes will rely on accumulated data rather than sudden events. As the June meeting nears, focus shifts from headlines to details. The FOMC’s guidance statement, expected mid-month, and Powell’s remarks could clarify how long this careful approach will continue. Based on past behavior, markets should be alert for subtle changes in language that indicate preparation rather than decisive action. Policy-sensitive assets, especially those tied to short-term rates, may see reduced volatility until early July, unless geopolitical events disrupt the market. At the same time, positioning should reflect a mild easing path, balanced against the gradual but visible influences from tariffs. If the timing is off, watch for liquidity issues around data releases that could cause unexpected reactions, not just in rates but across the broader market. The key question now is not if easing will happen this year, but how long the central bank waits before deciding conditions require it. The response will depend on the sequence of events—tariffs affecting consumers, weak job reports, and clearer forward guidance. It’s all about timing, not the possibility of action.

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