For next year, already with donald trump in the US presidency, the head of the Federal Reserve, Jerome Powellanticipated that the organization will be more “prudent” from now on when contemplating new reductions in rates.
“With today’s action we have reduced our rate by a full percentage point from its peak and our policy is now significantly less restrictive. Therefore, we can be more cautious when considering new adjustments“, said.
Powell spoke at the end of the two-day meeting of the Federal Open Market Committee (FOMC) of the Fed. The median of the forecasts of the agency’s governors indicated in another report that two more cuts are expected for 2025 to reach the 3.9% (equivalent to a range of 3.75% to 4%).
“We are going to seek greater progress in terms of inflationas well as continued strength in the labor market, and as long as the economy and the labor market are strong we can be cautious when considering further cuts,” Powell said.
Furthermore, the Fed’s forecasts show that one of the 19 officials does not see cuts by 2025three only project a single cut, 10 foresee them twice and three members affirm that there will be three modifications.
The entity also adjusted upwards its estimate of the long-term neutral rate to 3%. Cleveland Fed President Beth Hammack opposed this cut.
Trump effect and tariffs
“It’s very premature to try to come to any kind of conclusion. We don’t know what will be tariffed, from which countries, for how long, in what quantity. We don’t know if they will be retaliatory tariffs. We don’t know the transmission of all that to consumer prices,” said Powell, when asked about the trade policies that Trump announced he plans to apply.
“We need to take our time, not rush and do a very careful evaluation, but only when we have actually seen what the policies are and how they are implemented. We are simply not at that stage,” he stressed.
“We are at the stage of doing what other forecasters are doing, which is thinking about the questions, but not trying to come up with definitive answers for some time,” said Powell, whose term ends in May 2026.
Source: Ambito
