The FOMC is anticipated to pause after three consecutive rate cuts, maintaining rates at 4.25% to 4.5%. Analysts expect this decision is driven by a desire to avoid disrupting recent inflation progress. Job growth has exceeded expectations and inflation rates have dipped, which creates a delicate balance the Fed must maintain. Analysts also express concerns about potential inflationary polices from the new administration, especially President Trump's return, which could complicate future interest rate decisions.
According to the CME Group's FedWatch tool, interest rate traders are nearly unanimous that the central bank will hold rates at range of 4.25% to 4.5%.
Chair Powell stated multiple times that it was the belief of the Committee that the labor market has cooled sufficiently to bring inflation down to the 2% target.
Santa-Donato noted that the Fed won't want to undo the slow and fragile progress on moving inflation down to 2%.
Cohn emphasized concerns regarding Trump's inflationary policy proposals and how they could affect future rate decisions by the Fed.
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