NEW YORK – US President-elect Donald Trump’s impending return to the White House appears to put the Federal Reserve on a slower and shallower path for interest rate cuts, with a slew of new policies embraced by the Republican leader poised to juice the economy and stall, or reverse, the slowdown in inflation.
US central bankers are still widely expected to cut the Fed’s benchmark interest rate by a quarter of a percentage point to the 4.5 per cent to 4.75 per cent range when they wrap up their two-day policy meeting on Nov 7.
Futures contracts tied to the Fed’s policy rate are also pricing in a December rate cut, though with slightly less confidence than previously, as the central bank recalibrates borrowing costs to inflation that’s now much closer to its 2 per cent target, and to a cooling labour market.
But in a shift that could be consequential for businesses and households looking to refinance debt or borrow anew, traders are now betting the Fed will cut its policy rate only twice in 2025, lowering it to the 3.75 per cent to 4 per cent range and likely taking until July to do so.
If those bets bear out, the end of the Fed’s current rate-cutting campaign would come more than a year sooner and its policy rate would be a full percentage point higher than most Fed policymakers had projected after their initial rate cut in September.
Stronger-than-expected economic data since the September meeting had been progressively resetting market rate expectations for a shallower rate-cut path. That change in view gained steam as Trump clinched his victory over Democratic Vice-President Kamala Harris just hours after the last polls closed early on Nov 6.
Trump campaigned on promises to fix what he sees as an ailing economy,