Yesterday, the Fed left interest rates unchanged and announced it would slow the pace of quantitative tightening (QT) on Treasuries from USD 60bn to USD 25bn per month starting from 1 June. The post-meeting statement said, “In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective”. In the press conference, Fed Chair Powell said it would likely take longer than previously thought to achieve the “greater confidence” (that inflation is moving sustainably toward 2%) that the FOMC needs to see before it can cut rates. Unlike in March, Mr. Powell refrained from saying that rate cuts are likely to be appropriate later this year. Instead, he said “there are paths to cutting and there are paths to not cutting” this year. He still expects inflation to slow this year in his base case, although he is less confident of this than previously. That said, Mr. Powell said the next move for rates was “unlikely to be a hike”. We still see 75bp of cuts this year, starting in September.