On May 28th local time, the minutes of the Federal Reserve's May meeting revealed that the uncertainty surrounding the economic outlook was unusually high. Overall, the downside risks to employment and economic activity, as well as the upside risks to inflation, have increased, primarily due to the potential impact of increased tariffs.

However, the meeting minutes also pointed out that the existing data indicates that economic activity continues to expand at a robust pace, labor market conditions remain favorable, but inflation levels are still slightly high.

In terms of inflation, the minutes of the meeting pointed out that the information available at the current meeting indicates that consumer price inflation remains at a relatively high level. However, participants' expectations for inflation are higher than the forecasts made at the March interest rate meeting. It is expected that tariffs will significantly push up inflation this year, and the boosting effect will be somewhat reduced by 2026. By 2027, inflation is expected to fall to 2%.

In terms of the labor market, the minutes of the meeting believe that recent data indicate that the labor market remains robust, but it is expected that the labor market will weaken significantly, with the unemployment rate expected to exceed the staff's assessment of its natural rate by the end of this year and remain above the natural rate until 2027.

In terms of economic activity, the minutes of the meeting pointed out that due to the potential impact of measurement issues, the actual GDP of the United States in the first quarter has slightly decreased. It is expected that the actual GDP growth for the years 2025 and 2026 will be weaker than the forecast made in the March meeting, as the drag on actual economic activity from the announced trade policies is greater than previously predicted.

Data from the U.S. Department of Commerce shows that in the first quarter of 2025, the U.S. Gross Domestic Product (GDP) contracted at an annual rate of 0.3% on a quarter-over-quarter basis. In the fourth quarter of 2024, the U.S. GDP grew at an annual rate of 2.4% on a quarter-over-quarter basis. The U.S. Department of Commerce stated on the same day that the contraction of GDP in the first quarter was mainly dragged down by a significant increase in imports and a decrease in government spending.

The data released by the U.S. Bureau of Labor Statistics shows that the U.S. CPI in March rose by 2.4% year-on-year, lower than the market's expected 2.5%, with the previous value at 2.8%; the core CPI rose by 2.8% year-on-year, lower than the market's expected 3%, with the previous value at 3.1%; the seasonally adjusted non-farm employment population increased by 177,000 people in April, with an expected increase of 130,000 people, and the previous value was 228,000; the unemployment rate was 4.2%, unchanged from the previous month.

Beijing time in the early morning of May 8th, the latest interest rate decision from the Federal Reserve kept the target range of the federal funds rate at 4.25%-4.5% unchanged, in line with market expectations. In March, the Federal Reserve also maintained the aforementioned interest rate unchanged. Last year, the Federal Reserve cumulatively reduced interest rates by 100 basis points.