The US Federal Reserve is set to announce its interest-rate decision on Wednesday, with markets waiting for signals about the economy’s trajectory. However, analysts are more concerned about the uncertainty surrounding President Donald Trump’s sweeping policy changes, which could impact the economy.
Trump’s administration has introduced significant policy shifts, including changes to trade and immigration policies, as well as a reduction in the federal workforce. The White House has yet to provide clear guidance on these changes, leaving economists wondering how they will affect the economy.
Analysts believe that the Fed is facing a tight spot due to Trump’s influence over macroeconomic policy, which could limit its ability to set interest rates and manage the economy. According to GlobalData TS Lombard chief US economist Steven Blitz, “the development has caused the macroeconomic and market outlook for the US — the world’s largest economy — to remain uncertain.”
The Fed’s previous rate cuts in the second half of last year were partly driven by concerns about the economy, but now analysts expect the central bank to hold rates steady due to the uncertainty surrounding Trump’s policies. In fact, 102 economists polled by LSEG expect the rate to stay unchanged at 4.25% to 4.5%.
The Fed’s reluctance to cut interest rates may be driven by a desire not to send signals of “no-confidence” about its outlook, according to Thierry Wizman, global foreign exchange and rates strategist at Macquarie. The uncertainty surrounding Trump’s policies has led to a rise in inflation expectations, making it challenging for the Fed to set clear policy signals.
As the Fed Chair Jerome Powell prepares to address the press, economists are bracing themselves for an uncertain outcome. With markets waiting for clarity on the economy’s future, the Fed’s decision will be closely watched for its implications on interest rates and the overall economic outlook.
Source: https://www.businessinsider.com/fed-fomc-interest-rate-outlook-powell-economy-guidance-trump-policy-2025-3