In a key decision marking President Donald Trump's second term, the Federal Reserve is anticipated to halt rate cuts on Wednesday. Despite Trump's desire for influence over Fed decisions, Chair Jerome Powell is set to explain the rationale behind the central bank's impending decision during a post-meeting news conference.
Following three consecutive rate cuts late last year, the Fed is poised to enter a holding pattern due to limited progress in inflation and the robust US economy characterized by low unemployment and healthy growth. While Fed officials hint at potential future rate cuts, traders are skeptical about a cut at the upcoming March meeting.
Investors are eager for insights from Powell regarding the timing of future rate cuts, especially amidst uncertainties surrounding Trump's proposed policies and their impact on the economy. The Fed is closely monitoring the effects of tariffs, with Powell likely to avoid committing to a specific policy path given the fluidity of the situation.
Inflation, which had appeared stagnant in the latter half of 2024, showed signs of progress in December. While the Consumer Price Index rose more than expected, a measure excluding volatile food and energy prices eased, prompting optimism among Fed officials for potential rate cuts in the first half of the year.
With the Commerce Department set to release crucial inflation data on Friday, the Fed's stance on future rate cuts remains contingent on the trajectory of inflation and economic indicators.
