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3mo ago

Federal Reserve Prepares for Rate Pause as Trump Policies Add Economic Uncertainty

The Fed is expected to hold interest rates steady while assessing potential impacts from President Trump’s trade, immigration, and fiscal policy proposals.

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The U.S. Federal Reserve Building in Washington, D.C.
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Economists expect the annual inflation rate in December fell to 1.7 per cent, easing further from the previous month and setting up the Bank of Canada to continue cutting interest rates. A worker rolls signs past the Bank of Canada, Wednesday, April 10, 2024 in Ottawa. THE CANADIAN PRESS/Adrian Wyld

Overview

  • The Federal Reserve is set to pause rate cuts during its first 2025 meeting, citing persistent inflation and economic uncertainties tied to new Trump administration policies.
  • President Trump has signaled intentions for significant tariffs on U.S. trading partners, including a potential 25% levy on imports from Canada and Mexico starting February 1.
  • Global markets have shown mixed reactions, with cautious optimism stemming from Trump's restrained early actions but concerns over potential inflationary pressures from trade measures.
  • Economic policymakers worldwide, including the Bank of Canada and European Central Bank, are expected to adjust rates to address slowing inflation and potential fallout from U.S. tariff policies.
  • Trump has publicly pressured the Federal Reserve to lower rates further, while Fed Chair Jerome Powell remains focused on balancing inflation control with economic stability.