The Federal Reserve will gather this week for its first meeting in Donald Trump’s second presidential term, signaling that the central bank may keep its target policy rate near 4.25%-4.5%. Market analysis points to a high likelihood of maintaining this range due to multiple factors, including structural changes, inflationary pressures from tariffs and energy policies, and incoming White House initiatives like immigration reform.
Analysts caution that while Trump has pressured the Fed to lower rates, central bankers should remain cautious and refrain from immediate policy shifts. Former Dallas Fed President Robert Kaplan emphasized the need for patience, stating that “staying steady” is the right approach as inflation progresses sideways and structural changes unfold. He highlighted risks such as government spending cuts, regulatory scrutiny, and energy policies potentially disinflating the economy.
On the flip side, potential inflationary factors like tariffs and labor costs from mass deportations could push prices higher. The Fed’s quarterly economic projections, including a “dot plot” of individual members’ rate outlooks, are expected to remain unchanged following this week’s meeting. Investors will focus on Chair Jerome Powell’s upcoming news conference later in the day for any policy updates or commentary.
This week’s meeting comes as the Fed has already cut rates three times since 2018, reducing its short-term borrowing rate by a full percentage point. The central bank is expected to remain cautious until June, when clearer insights from Trump’s proposed policies may emerge.
Source: https://www.cnbc.com/2025/01/28/fed-meets-for-first-time-since-trumps-term-started-what-to-expect.html