Insights 
VT 
Rick Rieder discussed the Federal Open Market Committee (FOMC) and pondered the cessation of quantitative tightening (QT). He stated that recent tariffs imposed by Trump have yet to greatly influence U.S. inflation data, and anticipates the Federal Reserve will adopt a cautious, observational approach to interest rates.
Over the ensuing two months, the Fed is predicted to gain insight into the impact of tariffs on inflation, as businesses are currently absorbing costs but may eventually transfer them to consumers. Noting a slight decline in the labour market, Rieder indicated that the Fed might prepare for a rate reduction during the policy meeting in September.
The Fed’s Decision on Quantitative Tightening
Rieder also speculated about the Fed possibly ending its quantitative-tightening measures, following a decision in March to decelerate its pace. The FOMC statement will be released on Wednesday, June 18, 2025, at 1800 GMT, with Federal Reserve Chair Powell’s news conference occurring thirty minutes later.
Rieder’s remarks highlight a scenario where policymakers may step back from aggressive balance sheet reduction, especially given recent shifts in economic tone. Reducing the velocity of quantitative tightening suggests that liquidity conditions, while still tightening at the margins, may not exert the same dampening pressure on asset prices over the immediate term. That matters, especially for those watching rate-sensitive sectors. With transmission effects from earlier policy moves still working their way through the system, decisions about future actions could lean towards moderation.
The expectation of delayed inflation transmission from trade measures provides breathing room in pricing models. So far, companies appear to be absorbing tariff-related costs within their margins. But if price passthrough to consumers begins more forcefully in July or August data, it may narrow the central bank’s window for cutting. Until such a shift is confirmed, rate futures should retain a mild easing bias. That prospect grows stronger in the absence of convincing wage pressures or clear signs of demand-fuelled inflation.
With labour data softening only modestly, no immediate emergency is visible, but the hints of slack are notable enough to matter. Even a marginal uptick in jobless claims or slowed payroll expansion could shift expectations for the September meeting. If the trend deteriorates by August, front-end trades may reprice more aggressively and potentially pull forward policy response bets.
The Fed’s Approach and Timing
Rieder’s thoughts imply a deliberate Fed, watching carefully rather than wading in ahead of clarity. For now, emphasis remains on keeping flexibility. No large move will likely come without clearer signals—either in the form of sustained consumer price acceleration or unmistakable weakness in job creation. Until then, any recalibration will stem from cumulative data, not immediate shocks.
As the June meeting approaches, attention shifts from headlines to fine print. The FOMC’s guidance statement—due mid-month—and Powell’s subsequent remarks may clarify how much longer this steady-hand approach will last. Given past signalling behaviour, markets should listen for any subtle adjustment in language that suggests preparation rather than intention.
Policy-sensitive instruments, particularly those pegged to the short end, may exhibit compressed volatility through early July, unless geopolitical catalysts interfere. Meanwhile, positioning should reflect a mild easing path balanced against the slow but visible pressure point from tariffs. If timing aligns poorly, watch for compressed liquidity windows around data releases to create secondary jolts, not just in rates but across broader macro products.
The question now becomes less about whether easing occurs this year, but how long the central bank waits before deciding conditions warrant it. Reaction will depend on sequencing—tariffs hitting consumers, weakening job reports, and refined forward guidance. It’s all about when, not if.
