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Reading: Fed Sticks to Rates as Inflation Persists and Trump’s Policies Loom Large
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COINTURK NEWS > Economy > Fed Sticks to Rates as Inflation Persists and Trump’s Policies Loom Large
Economy

Fed Sticks to Rates as Inflation Persists and Trump’s Policies Loom Large

In Brief

  • The Fed is likely to maintain interest rates during its upcoming announcement.

  • Persistent inflation and labor market recovery are key factors in the Fed's decision.

  • Trump's policies add complexity to the Fed's inflation outlook and decision-making.

İlayda Peker
İlayda Peker 4 months ago
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The Federal Reserve (Fed) is expected to announce its interest rate decision on Wednesday at 22:00 Turkish time, maintaining the policy rate in the 4.25-4.50% range. Market experts predict that the Fed will insist on keeping rates stable as it awaits clearer signals regarding the declining trend in inflation. According to CME Group’s FedWatch data, the likelihood of no change in rates stands at over 99%. If this expectation holds true, it will mark the first “pause” in rate adjustments since September 2024.

Contents
Why the Fed May Keep Rates Steady?Impact of Trump’s Policies on Fed Decisions

Why the Fed May Keep Rates Steady?

Since 2022, the Fed has been notable for its aggressive interest rate hikes to combat inflation. However, the rate cut process that began in September 2024 has shifted to a wait-and-see approach in recent months. The primary reason for this cautious stance is the recovery signals from the labor market and the persistent high inflation in certain sectors, notably in housing and energy costs, which continue to strain consumer spending.

Fed Interest Rate Decision Timing

The Fed’s cautious approach is influenced by consumer prices still exceeding the target of 2% and an unexpectedly resilient unemployment rate. Furthermore, concerns that the expansive monetary policies following Donald Trump’s administration could reignite inflation are also impacting decision-making.

Impact of Trump’s Policies on Fed Decisions

The tax cuts and import tariffs enacted after Trump took office have led the Fed to reassess its inflation assessments. Experts warn that expansionary monetary policies could drive consumption up and prices higher. Analysts from Deutsche Bank note that the uncertainty caused by the new administration strengthens the Fed’s cautious stance.

As the global economy slows down and trade tensions between China and Europe escalate, the Fed faces additional challenges. Moreover, keeping rates high strengthens the US dollar, negatively affecting exports. Nevertheless, the Fed has prioritized “price stability,” with market participants generally expecting the first rate cut only after mid-year.

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Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should conduct their own research.

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İlayda Peker 27 January, 2025 - 2:35 pm 27 January, 2025 - 2:35 pm
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