What to expect from the Federal Reserve as the central bank makes its first rate decision since President Trump returned to the White House.
Transcript:
Conway Gittens: Well, the Federal Reserve is set to hold its first policy meeting of 2025. Tell me, what are you expecting to see in terms of interest rates?
Brian Jacobsen: I think that they’re probably on pause for this upcoming meeting, mainly because we know that they have revised up their inflation expectations for 2025, some by more than others. And so I think that really what they want to see is what are the policies that are actually being implemented out of the new Trump administration before they decide whether or not they can continue with the cutting path. My expectation is that come March, they’ll probably be in a position to be comfortable once again, to start cutting, but maybe at a dramatically slower pace than what they have been cutting so far.
Conway Gittens: So slower pace – how many rate cuts do you think the Fed will deliver in 2025?
Brian Jacobsen: It seems like the market is all over the place with this one. It really is. The market has gone from, you know, if you think about maybe like four cuts down to one, if not zero, the Fed itself seems to be penciling in two rate cuts, and I think that’s a reasonable base case where if we think about where rates are right now, they’re still higher than what the so-called neutral rate is. So monetary policy is still restrictive. And I think that they can afford to cut maybe two more times, once in March and then once again in June before they’re going to want to take maybe a more prolonged pause.
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