Trump's election victory puts Fed on path for fewer rate cuts

Published On Nov 7, 2024, 5:13 AM

Donald Trump's recent election victory suggests that the Federal Reserve may adopt a less aggressive approach to interest rate cuts than previously anticipated. With new economic policies proposed by Trump, such as tax cuts and tariffs, expectations are building for stronger economic growth and potential inflationary pressures. Market speculation indicates the Fed might now reduce rates only twice in 2025, rather than the previously expected more frequent cuts. This shift could lead to a higher base rate for borrowing than what was initially projected by the Fed's policymakers following their September review.

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With the potential for fewer rate cuts and a stronger economy due to Trump's policies, sectors sensitive to interest rates, such as financial services, may benefit. Additionally, inflationary pressures could lead to higher prices for goods and services, affecting consumer behavior and possibly benefiting companies in the consumer discretionary and industrial sectors.

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