The Federal Reserve’s final meeting under Biden could set the stage for economic turmoil or success under Trump – and their intentions aren’t clear.
At a Glance
- Fed expected to cut key lending rate by a quarter-point in final Biden-era meeting
- Rate cut comes despite recent inflation spikes, signaling prioritization of economic growth
- Trump’s potential policies may force Fed to slow future rate cuts
- Meeting lays groundwork for economic policy transition into next presidential term
Fed’s Final Act Under Biden: A Quarter-Point Rate Cut
The U.S. Federal Reserve is poised to make a significant move in its final meeting under President Joe Biden’s administration.
Despite recent inflation upticks, the central bank is expected to announce a quarter-point cut to its key lending rate. This decision comes as the Fed attempts to balance economic growth support with inflation risks, potentially lowering the key rate to between 4.25% and 4.50%.
This rate cut follows a series of reductions totaling 0.75 percentage points since September, aimed at bolstering the labor market. However, the Fed’s strategy moving forward may be more cautious, given the looming transition to a new presidential administration.
Federal Open Market Committee statement: https://t.co/60DDKwtaQA #FOMC
— Federal Reserve (@federalreserve) November 7, 2024
Uncertainty Looms as Trump Era Approaches
As President-elect Donald Trump prepares to take office for a second term, the Fed faces a complex economic landscape. Trump’s proposed policies, including potential tariffs and deportations, could simultaneously stoke inflation and hinder growth. This uncertainty is likely to influence the Fed’s approach to future rate cuts.
“The Fed is expected to be more gradual in its easing of monetary policy in view of the policies that will be put in place by the (Trump) administration,” EY Chief Economist Gregory Daco told the press this week.
While futures markets indicate a high probability of the imminent rate cut, the path for future reductions is less certain. Financial markets predict rates could be three-quarters of a percentage point lower by the end of 2025, but this trajectory may be adjusted based on the incoming administration’s economic policies.
The Fed’s decision-making process is further complicated by its need to consider the effects of government fiscal policy on the economy, despite its independent mandate. This balancing act becomes even more crucial as the central bank prepares to release updated economic forecasts alongside its rate decision.
Previous forecasts suggested four additional quarter-point cuts in 2025, but recent inflation upticks may slow this path. Major financial institutions like Barclays and Goldman Sachs have differing predictions for the Fed’s future actions, reflecting the uncertainty surrounding economic policy in the coming years.
As the Fed navigates this pivotal transition, the implications for the American economy are significant. The central bank’s decisions will impact everything from consumer lending rates to business investments. With inflation concerns persisting and economic growth hanging in the balance, the Fed’s strategy in the coming months will be crucial in shaping the economic landscape for years to come.
Are they giving President Biden a final goodbye gift to establish a legacy, or are they plotting something more sinister?
