According to ABN AMRO, the Federal Reserve maintained its policy rate at a target range of 3.50–3.75% during its April meeting, citing no consensus among FOMC members to begin easing until inflation driven by tariffs on goods moderates [1]. The bank highlights that the recent oil shock has contributed to higher energy and headline inflation, prompting the Fed to adopt a 'higher-for-longer' stance on interest rates [1].
ABN AMRO forecasts that the Fed will keep rates unchanged until December, as policymakers seek to assess potential second-round effects from elevated inflation [1]. Following this period, the bank anticipates a gradual easing cycle, with the Fed implementing quarterly 25 basis point cuts. This would bring the policy rate down to a range of 2.75–3.00% by June of the following year, which ABN AMRO notes is at the lower end of neutral rate estimates [1].
The analysis underscores that the Fed's cautious approach is driven by persistent headline and core inflation, and that any shift toward easing will be contingent on clear signs of moderating goods inflation, particularly those influenced by tariffs [1].
CONCLUSION
ABN AMRO projects that the Federal Reserve will maintain its current rate stance until December, responding to ongoing inflation pressures and the recent oil shock. Gradual rate cuts are expected to follow, contingent on inflation developments, signaling a cautious but eventually dovish policy path.