President Donald Trump has signaled his desire for the Federal Reserve to cut interest rates immediately, but financial markets remain doubtful about this occurring soon. More analysts are now warning that rate hikes may be on the horizon.
Just days after Trump’s inauguration, he began exerting pressure on the Fed to lower rates. However, Wall Street views this stance as unlikely and even sees rate increases as a growing possibility.
At a recent World Economic Forum in Davos, Trump emphasized his demand for immediate rate cuts and highlighted his superior understanding of interest rates compared to Federal Reserve Chair Jerome Powell. The Fed’s upcoming meeting on March 21 is expected to provide clarity, with traders anticipating minimal changes to rates after a significant drop last year.
Economic factors such as tariffs, tax cuts, and immigration curbs are expected to drive upward pressure on inflation, according to experts. Thanos Papasavvas of ABP Invest noted that the Fed may instead prioritize inflation over employment in 2025, despite Trump’s policies. Meanwhile, Dan Ivascyn of Pimco expressed optimism about maintaining current rates but acknowledged the possibility of hikes if economic data supports higher inflation expectations.
Bank of America has also indicated that the Fed’s rate-cutting cycle is nearing its end, suggesting a shift toward hikes if core inflation exceeds 3% and long-term inflation forecasts rise. Experts like Torsten Sløk predict a 40% chance of rate increases this year, citing a re-accelerating economy.
The article concludes with a reminder that momentum in the U.S. economy remains strong, challenging the narrative of restrictive monetary policy.
Source: https://fortune.com/2025/01/26/fed-rate-cuts-outlook-trump-demand-jerome-powell-hike-fomc-meeting