Fed policy expected to collide with the reality of a second Trump term
The Federal Reserve is set to announce its latest rate decision Thursday — and while it is widely expected to lower its key rate for the second time since September, Donald Trump’s electoral victory brings a new set of uncertainties — and, most likely, conflicts — for central bank policymakers.
The Federal Reserve is set to announce its latest rate decision Thursday — and while it is widely expected to lower its key rate for the second time since September, Donald Trump’s electoral victory brings a new set of uncertainties — and, most likely, conflicts — for central bank policymakers.
As of Wednesday, Wall Street traders were nearly unanimous that the Fed would cut the federal funds rate, which acts as a benchmark for other borrowing rates in the economy, by a quarter-point. The central bank is looking to dial back the restrictive lending environment it had put in place to rein in the surging inflation that took hold amid the pandemic.
With that cut, the central bank’s federal funds rate would fall back to about 4.5%.
Heading into Tuesday’s presidential vote, the Fed would have been justified in celebrating the return of inflation back to its 2% target.
At the same time, unemployment remains subdued at 4.1%.
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