Trump 2.0 complicates Jay Powell's rate path at the Fed

Published On Nov 11, 2024, 4:00 AM

The article discusses the implications of Donald Trump's return to the White House on Federal Reserve policy, particularly regarding interest rates. Federal Reserve Chairman Jerome Powell indicated uncertainty about how Trump's proposed policies, such as tax cuts and tariffs, might affect future rate cuts. Economists have begun adjusting their forecasts for 2025, predicting fewer rate cuts than previously expected, due to potential inflationary pressures from tariffs and immigration policies. The Fed's potential rate cut timeline is becoming more cautious, with some economists now predicting only one rate cut in 2025, while previously there were expectations for four.

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The potential for fewer rate cuts in 2025 primarily stems from anticipated inflationary pressures due to Trump's economic policies. A heightened inflation environment could hinder monetary policy flexibility, as the Fed may prioritize controlling inflation over stimulating growth. Investors might become more cautious as the Fed's rate cut path slows down, impacting sectors sensitive to interest rate changes.

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