United States Federal Reserve System symbol

Jerome Powell has tantalized the financial world with the prospect that the Federal Reserve he leads may soon cut interest rates for the first time in over a decade.

Probably not quite yet, though.

When the Fed issues a policy statement Wednesday and Powell holds a news conference, the message will likely echo the theme the chairman struck in a speech early this month: that the Fed will act if it thinks the Trump administration’s trade conflicts are threatening the U.S. economy.

Powell’s remarks were seen as a signal that the Fed will likely cut rates later this year, and the stock market surged in response.

However, in a weekly economics report, CIBC senior economist Andrew Grantham noted that no Federal Open Market Committee (FOMC) members expected lower rates at the last announcement and some are still saying that rates are low relative to neutral (the rate at which the economy can grow at potential with stable inflation).

As such, the Fed dot plot, a projection of rates by FOMC members, may result in a median projection showing interest rates still unchanged by the end of this year — in contrast to the two cuts markets are priced for, he said.

He added that, unless trade tensions with China escalate, the Fed will continue to “judge policy based on incoming data.”

Recent incoming data have been solid, such as U.S. retail sales, which were released Friday and increased 0.5% in May, suggesting consumers are still spending at a healthy pace.

Grantham also said that the impacts of tariffs on exports and business investment may become noticeable by year-end, so the potential for a cut likely doesn’t make sense until the fourth quarter at the earliest.

At this week’s meeting, a more dovish-sounding Fed would put upward pressure on bond yields and the U.S. dollar, and potentially unsettle equity markets, he said.

For more details, read the CIBC report.