Although the US Federal Reserve refrained from surprising markets and trimmed the benchmark interest rate by 25 bps to 4.50 – 4.75 per cent on November 7, markets seemed disappointed by Chair Jerome Powell’s tone, which suggested uncertainty about the future path of interest rates.
In the September meeting, the US Fed slashed the benchmark interest rate by 50 basis points to 4.75 per cent-5 per cent for the first time in four years, expressing confidence that inflation was consistently on track to come near the target level.
On November 7, US Fed policymakers underscored job market has generally eased while inflation continues to move towards the US central bank’s two per cent target.
The Fed is expected to continue reducing rates through 2026, aiming to bring the benchmark rate to a range of 2.75 to 3.00 per cent.
However, much will depend on how growth and inflation dynamics unfold from this point and the impact of Donald Trump’s presidency on these factors.
Can the Trump factor influence US Fed rate decisions?
Trump has publicly criticised Powell several times. In his first term, he even explored the possibility of firing him. Experts believe Trump’s policies about aggressive tariffs and extending tax cuts could drive up inflation and long-term interest rates, potentially prompting the Fed to slow its pace of rate cuts.
Some experts underline that Trump’s return raises questions about the Fed’s freedom to…
