US Federal Reserve officials continued to pencil in two interest-rate cuts in 2025, though new projections showed a growing divide among policymakers over the trajectory for borrowing costs as the shockwaves from Donald Trump’s tariffs make their way through the US economy. Seven officials now foresee no rate cuts this year, compared with four in March, and two others pointed to one cut.

At the same time, 10 officials expect it will be appropriate to lower rates at least twice before the end of 2025. Fed officials and economists broadly expect the president’s expanded use of tariffs—most of which are the subject of litigation as potentially illegal—to weigh on economic activity and put upward pressure on prices if they remain in place. Add to that a proposed bill in Congress that could add $3.4 trillion to the national debt, and nervousness in the near term is likely to remain.  —David E. Rovella

What You Need to Know Today

Even if the Supreme Court eventually nixes Trump’s novel effort to exercise emergency powers to levy his tariffs, he has other tools—and he’s already using them. The administration is pressing ahead with another tariff barrage that some trade experts say is more legally sound and may end up having an equally broad effect on imports.

The US Commerce Department is set within weeks to announce the outcomes of self-described investigations into sectors deemed vital to national security, including semiconductors, pharmaceuticals and critical minerals. The inquiries are widely expected to result in tariffs. Trump is already using this non-emergency authority, under Section 232 of the Trade Expansion Act, to impose import taxes on steel and aluminum he launched in 2018. Recently, he’s widened the scope by targeting consumer goods that contain the metals.

Trump’s attempt to nationalize California’s National Guard to push back on largely peaceful protests against his immigration policy, and to assist his immigration forces in detaining migrants, is the subject of multiple legal challenges as likely illegal and unconstitutional. Meanwhile the mayor of Los Angeles has lifted a curfew and most demonstrations have dissipated. But the president has nevertheless assigned thousands more National Guard soldiers to eventually hit the streets of the nation’s second-largest city. Two thousand were activtated yesterday, the military revealed, joining about 2,000 National Guard soldiers already assigned and 700 active-duty Marines. Over the weekend, an estimated five million people protested against Trump and his policies in what organizers said were 2,000 peaceful demonstrations across the US.

The culling of human employees in favor of artificial intelligence is gathering pace. Microsoft is planning to fire thousands of workers, particularly in sales, as part of the company’s latest move to terminate employees amid heavy spending on AI. The dismissals are expected to be announced early next month, following the end of Microsoft’s fiscal year. They follow Microsoft’s firing of 6,000 other employees last month, largely in its product and engineering departments.

Microsoft CEO Satya Nadella Photographer: David Ryder/Bloomberg

A rally in stocks fizzled out after Fed Chair Jerome Powell warned that tariff-driven economic uncertainty and inflation risk continued to complicate the central bank’s bid to ease monetary policy in earnest. Equities closed little changed, with the S&P 500 ending below 6,000 after briefly crossing that mark. “Ultimately, the cost of the tariff has to be paid and some of it will fall on the end consumer,” Powell said. “We know that because that’s what businesses say, that’s what the data say from the past.” Here’s your markets wrap.

The Trump administration is reporting that foreign investors’ holdings of US Treasuries were close to a record high in April despite the turmoil in financial markets in the wake of Trump’s trade war. Foreign holdings totaled $9.01 trillion for the month, the second-highest figure on record and down just $36 billion from March, according to the Treasury Department. The drop mainly reflected net sales by foreign private investors of US notes and bonds.  

“The ‘Sell America’ narrative is an over-exaggeration,” said Vishal Khanduja, head of the broad markets fixed-income team at Morgan Stanley Investment Management. “But we do expect slow and bumpy dollar deprecation.”

What You’ll Need to Know Tomorrow

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