🥛 When will the Fed cut rates? ✂️

GM. This is Milk Road Macro, the newsletter that breaks down the Fed’s snoozefest so you don’t have to fake it on finance Twitter.

Here’s what we’ve got for you today:

✍️ Everything you need to know about this week’s Fed meeting
🎙️ The Milk Road Macro Show: The Macro Framework for Investing in the Next Decade w/ Mark Yusko.
🍪 Tesla is evolving.

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EVERYTHING YOU NEED TO KNOW ABOUT THIS WEEK’S FED MEETING

It’s Fed week again.

And that means I get to watch Chair Jerome Powell waffling on and on for 45 minutes - so you don’t have to.

The end of the road for Powell is nearing.

There are only two more meetings left before he vacates the top job.

Then, there’ll be a new voice in town.

But for now, Powell’s still here, clinging on - and waffling on.

So, what happened at this week’s meeting?

And when will the Fed start cutting rates again?

Let’s take a look…

So, what happened at the meeting?

In an unsurprising development, the Fed kept interest rates unchanged.

Markets were pricing in a less than 5% chance that rates would be cut at this week’s meeting.

As always with the Fed, it’s a tussle between the two sides of the central bank’s dual mandate: the labor market (aiming for “maximum employment”) and inflation (aiming for “stable prices”).

Powell talked up a “clear improvement” in the economic outlook and said the job market shows signs of steadying, after it deteriorated in recent months.

The latest jobs report showed the official unemployment rate had improved.

That upgraded assessment of the labor market is likely to hold expectations for a near-term rate cut at bay, despite escalating pressure from President Donald Trump.

Still, Powell was at pains not to overstate the improvement in the labor market.

While it’s shown signs of stabilizing, “I wouldn’t go too far with that”, he said.

On inflation, Powell said the overall story was “modestly positive”.

Official inflation metrics have been decelerating in recent months - but they still sit way above the Fed’s official target of 2%.

Powell also noted that he thought most of the overshoot in inflation data through large parts of 2025 was related to tariffs, and he believes this is now “passing through” as a “one-time price increase”.

The main takeaway from the meeting? Powell saying: “Let the data light the way for us”.

But perhaps the most important comment from Powell, in terms of markets, was “it's not our base case that the next move will be a rate hike”.

So the cutting cycle remains alive and well - we’re just on pause.

Divided Fed

As part of a recurring theme, we saw two dissents (voting members making it known they disagree with the rate decision).

One dissent came from Stephen Miran (“Trump’s man”), who has dissented at every meeting since joining the Fed board last year - he wanted to cut by 25bps.

And one dissent came from Christopher Waller (one of the four names on the shortlist to become the next Fed Chair) - he also wanted to cut by 25bps.

These dissents keep up the “new-look divisive Fed” picture.

Dissents have now become a common theme in recent months, after being unheard of for many years.

Source: Bloomberg

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EVERYTHING YOU NEED TO KNOW ABOUT THIS WEEK’S FED MEETING (P2)

OK cool… So, was this dovish or hawkish?

Often, even when the Fed doesn’t move rates, there can be a hawkish or dovish undercurrent to the press conference that can move markets.

But, honestly, there was really very little to take from this week’s meeting - it was a real snoozer, with no direction.

Powell was non-committal, non-confrontational, and honestly just quite boring.

There was no signal here, and messaging was mixed.

“You could get whiplash from the various descriptions”, said Tim Mahedy, a former senior adviser at the Federal Reserve Bank of San Francisco.

And asset markets also showed no strong reaction during and after the meeting.

Still, according to Augur Infinity’s LLM-based sentiment score for the FOMC statement, it was the most hawkish for several months.

Source: Augur Infinity

So, when will the Fed cut rates next?

There wasn’t a whole lot of movement in expectations for future Fed rate cuts.

Interest rate markets are currently pricing in a total of less than two cuts for 2026, as they were before this week’s meeting.

The first cut is priced for June or July (after Powell leaves).

The second cut is tentatively priced for October (but still roughly 50/50).

Wrapping up

As I said - this was a real snoozer.

Powell appears to be coasting through until his Fed Chair term ends - just two more meetings to go, Jerome.

Then, things will really heat up again as Trump’s new Fed Chair will arrive with a mandate to cut rates.

Currently, BlackRock CIO Rick Rieder is the frontrunner for the top job, according to speculators on Polymarket.

Source: Polymarket

I expect it’s likely that Powell’s last two Fed meetings will be similar to this week - non-committal.

Unless inflation really nosedives lower, or the labor market starts deteriorating again.

And if we get a confirmed name for the next Fed Chair soon - markets might stop listening to Powell entirely and take clues from the incoming boss.

Enter: the shadow Fed Chair.

That’s it for this edition - catch you in the next one.

INVESTING EARLY WINS BIG 🚀

In today’s episode, we sat down with Mark Yusko, Founder, CEO & CIO of Morgan Creek Capital, to talk about where to find the next generation of wealth in 2026.

Here’s what you’ll hear:

The ABCD framework for the digital age: AI, Blockchain, Chips, and Data working together.
Why infrastructure and picks and shovels matter more than hyped assets at stretched valuations.
Where AI, blockchain, privacy tech, and next wave compute intersect for outsized opportunity.
Mark’s macro surprises and why non consensus positioning can outperform over time.

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BITE-SIZED COOKIES FOR THE ROAD 🍪

Tesla is evolving - and CEO Elon Musk revealed that his company will scrap two car models, and instead focus on building humanoid robots. Musk also suggested that selling electric vehicles will soon be an afterthought for the business.

Tensions between the U.S. and Iran are escalating after President Trump warned the country’s leaders to make a nuclear deal or face military strikes. Iran said it’s ready for dialogue but warned it will “defend itself and respond like never before”.

We’ve seen a lot of big tech earnings this week - with mixed results. Meta stock surged after an earnings beat and increased CapEx guidance - while Microsoft stock plunged amid AI pay-off concerns.