BlockBeats News, May 7th - JPMorgan Chase pointed out that when the Federal Reserve is caught in a dilemma due to conflicting macroeconomic data, its final decisions often lag behind the situation. President Trump is increasingly urgently calling for the Fed to lower interest rates, but the Fed is in a difficult position. JPMorgan Chase analysts stated that it is highly unlikely for the Fed to cut interest rates this week as it kicks off its May policy meeting, and the likelihood of a rate cut in subsequent meetings is also very low. JPMorgan Chase believes that there are two reasons why Fed officials are constrained in terms of monetary policy.

One reason is that rising inflation expectations make it difficult for the Fed to initiate rate cuts. The latest consumer inflation report shows that inflation in March rose 2.4% year-on-year, above the Fed's 2% target. Compared to what might happen in the future, this number is still quite low: the one-year inflation expectation compiled by the University of Michigan is 6.5%. Trump's tariff policy is expected to increase consumer costs, which is a key driver of the significant rise in inflation expectations. Concerns sparked by the trade war have intensified the risk of stagflation, which is the possibility of the U.S. economy stagnating while prices continue to rise. In this situation, the Fed is actually in a dilemma because it cannot simultaneously address both of these issues.

The second reason is that macro data has not yet shown the necessity of a rate cut. Encouraging current data mask the issue of inflation expectations, with macroeconomic data continuing to remain robust and even showing relative strength in some aspects. Last Friday's surprisingly positive April non-farm payroll report boosted investor confidence and drove the stock market higher. In other words, the market has not priced in an imminent recession. JPMorgan Chase's analysts wrote: "The S&P 500 Index (SPX) currently has a forward P/E ratio of 21 times, with earnings per share (EPS) expected to grow 10% this year and 14% next year. This does not at all reflect significant concerns about a recession."