The Fed unlikely to yield to Trump's demand for rate cuts, with future uncertainty

From Investing.com: 2025-01-27 07:33:00

Investors are watching closely to see how the Fed and bond market will respond to President Trump’s call for lower interest rates, although the central bank is unlikely to make decisions based on White House directives.

President Trump has declared that he will “demand” a cut in interest rates, with his influence expected to impact monetary policy decisions, even if not in the way he prefers.

Using Fed funds futures as a guide, the central bank is expected to keep its target rate unchanged this week, with a rate cut possibility in March. The Treasury market is currently pricing in a relatively neutral outlook for rate changes.

Analysts are looking for potential rate cuts in March and June, but uncertainty surrounding Trump’s policies, economic activity, and inflation may influence Fed decisions. The Fed is likely to remain cautious on additional rate cuts until there is more clarity on economic and fiscal policy.

Harvard economist Ken Rogoff believes the odds of a rate hike are the same as a rate cut, while Capital Economics advises that a stagflationary policy mix from the Trump administration may lead to fewer rate cuts depending on policy implementation timing. The Fed’s monetary policy decisions are currently highly dependent on Trump’s actions.



Read more at Investing.com: Will the Fed Yield to Trump’s Rate Cut Demands Amid Sticky Inflation?