President-elect Donald Trump’s imminent return to the White House appears to be taking the Federal Reserve on a slow and shallow path to cutting interest rates, with many of the new policies adopted by the Republican leader poised to slow down and stall, or reverse, the economy. Are. slowdown in inflation,
US central bankers are still widely expected Fed’s benchmark interest rate cut up to a quarter percentage point 4.50%-4.75% range when they conclude their two-day policy meeting on Thursday.
Futures contracts tied to the Fed’s policy rate are also pricing in a December rate cut, although with slightly less confidence than before, as the central bank readjusts borrowing costs to inflation that is now at its core. 2% is very close to the target, and cold labor market,
But in a change that could be consequential for businesses and households looking to refinance loans or borrow anew, Traders are betting now The Fed will cut its policy rate only twice in 2025, bringing it down to a range of 3.75%-4% and will likely take until July to do so.
If those bets are successful, the end of the Fed’s current rate-cutting campaign would be more than a year early and its policy rate would be a full percentage point lower than what most Fed policymakers had anticipated after the initial rate cut in September. Will be more.
Stronger-than-expected economic data since the September meeting was gradually resetting market rate expectations for a path towards fewer rate-cuts.
That change in approach gained momentum Trump secures his victory over Democratic Vice President Kamala Harris Just hours after the final voting ended early Wednesday morning.
Trump campaigned on a promise to fix what he saw sick economyand planning to impose higher tariffsLower taxes, and initiate an immigration crackdown to do so.
Economists say those policies are likely to lead to faster economic growth and a tighter labor market, which, along with higher import costs, will put upward pressure on prices.
Many Wall Street economists cited those risks Wednesday as they planned fewer Fed rate cuts next year.
Some analysts have warned that the effects of Trump’s policies could last for years, and it is unclear how fully he will follow through on his pledges.
“Delaying the inflation implications from tariffs and expansionary fiscal policy allows the Fed to continue cutting interest rates into 2026, as the central bank still needs to make monetary policy less restrictive,” analysts at Oxford Economics wrote. ” See the Fed will bring its policy rate closer to 3% by mid-2026.
That view may change, he said, as Trump’s intentions become clearer in the next few months.
