Federal Reserve Prepares for Interest Rate Cuts

Federal Reserve Chair Jerome Powell is expected to announce a quarter-point interest rate cut, but signals a cautious approach towards future cuts due to inflation concerns. Markets, buoyed by optimism around Donald Trump's incoming administration, anticipate only one or two additional cuts in 2025, despite Trump's aggressive push for lower rates. Historically, Trump has had a contentious relationship with the Fed, criticizing Powell for not cutting rates quickly enough during his first term. The Federal Reserve is likely to pause further cuts in January, which could heighten tensions with the Trump administration, particularly as Trump has expressed desires for substantial reductions. Analysts predict that even in a favorable scenario, the Fed may not return to the near-zero rates seen in 2020, contradicting Trump's campaign promises. The Fed’s forecasts, expected to accompany the December rate cut announcement, are anticipated to reflect a more conservative outlook for future rate adjustments.