Fed's Anticipated Rate Cut Decision

Experts predict that the United States Federal Reserve will reduce its benchmark interest rate by 25 basis points (bps) at the upcoming Wednesday meeting, marking a third consecutive cut. This decision is expected to be based on several key economic factors.

Firstly, the recent rise in the annual inflation rate, which matched projections, will be a crucial consideration. Additionally, the Fed's own estimate of economic activity growth and the stability of the labor market will influence the decision. A more detailed explanation is expected in the economic projections to be released later in the day.

Looking ahead to 2025, concerns emerge as President-elect Donald Trump prepares to return to the White House. Fed Chair Jerome Powell has highlighted potential inflationary pressures from Trump's proposed tariffs on foreign goods and more restrictive immigration rules, which could pause the cutting cycle. Furthermore, some Fed colleagues have advised a slower-paced rate reduction due to the risk of inflation either becoming uncertain or declining excessively.

Despite these differences and Powell's warnings about potential negative impacts, President Trump has stated he will not ask Powell to resign. Treasury Secretary nominee Scott Bessent has confirmed Powell is expected to complete his term, signaling the next administration's trust in the central bank and potentially providing certainty to stock market investors.