Fed Delays Rate Cuts
- Unity Investments
- May 8, 2025
- 2 min read
“The costs of waiting to see further are fairly low, we think, so that’s what we’re doing” - U.S. Fed Chairman Powell.
Last night, the Fed made the resolute - albeit widely expected - decision to wait for more data points to make a judgement on whether to lower rates. This means that we might see higher rates for longer, because tariffs and re-shoring (US durable good orders hit all time high in Mar 2025) will have a substantive impact on inflation. As U.S. and China continue to decouple in key industries - as evident by Apple’s decision to migrate most of its China-based supply chain to India and Vietnam for the coming quarter - China ceases to be an effective source of deflationary exports for the U.S. We believe that this will make inflation more sticky and stubborn in the U.S., regardless of where trade tariffs ultimately settle.
At the same time, we expect more investments in onshore U.S., as the economics in a post-tariff global paradigm begin to make sense for U.S. re-shoring. For example, TSMC’s latest US$100 billion investment to increase fab capacity speaks volumes. This requires enormous amount of labor, materials, equipment, all of which will test a relatively tight domestic supply chain and labor market.
In addition, a pronounced decline in illegal immigration under the current administration is poised to exert upward pressure on inflation by constraining the availability of low-wage labor, particularly in critical sectors such as agriculture, construction, and services. This contraction in the labor supply can intensify wage pressures and increase production costs.
At Unity, we are not macroeconomists, but we are keenly aware of macro conditions. We believe that the current environment is optimal for private credit. The uncertainty and chaos in the global economy, plus higher rates, will likely create more volatility than before, making equities less attractive. Yet, yield on everyday savings products and CDs are underwhelming. So where should forward-looking capital go?
This is exactly where Unity Investments comes in. By providing a perfect and customizable toggle between liquidity and yield, Unity investors are tapping into true alternative yield — with risk-adjusted returns built for long-term compounding. For example, when interest on a loan is deposited into your HYMA account, it begins to compound at a cash rate the next day. If the cash ended up in your bank account, it will likely just sit there not earning anything, unless you make an effort to subscribe in a term deposit or CD. But let’s be honest, no one actually makes the effort. At Unity, we make it easy for you.
This is Life, Compounded.
