America.. Expectations of a slowdown in interest rate cuts as inflation continues to rise

Monetary policymakers are likely to recommend a lower rate next year than previously expected.
Officials are preparing to reduce the base interest rate, which affects many consumer and commercial loans, by a quarter of a percentage point to about 4.3%, when their meeting ends the day after tomorrow, Wednesday.
At this level, the interest rate would be a full point below its highest level in four decades, reached in July 2023.
Monetary policy makers had kept the key interest rate at its peak for more than a year in an attempt to limit inflation, before cutting it by half a point in September and a quarter of a point last month.

Low unemployment rate

The problem is that while the unemployment rate has fallen sharply from its record level of 9.1% in mid-2022, it is still higher than the Federal Reserve’s target of 2%.

As a result, the Council, headed by Jerome Powell, is expected on Wednesday to indicate a shift towards a more gradual approach to rate cuts over the next year.
Analysts say that after cutting rates three times in a row, the central bank will likely cut rates once every few meetings, and perhaps at a slower pace than that.

Slow down the pace of cuts

“We are on the cusp of a transition in which there will not be a rate cut at every meeting,” says David Wilcox, a former Fed official and economic analyst at Bloomberg Economics and the Peterson Institute for International Economics. “They will slow down the pace of cuts,” referring to Federal Reserve officials.

What enhances the chances of slowing the pace of interest cuts in the United States is that the US economy achieved stronger growth than expected during the third quarter of this year.
Inflation remains at high levels for longer than expected.

Trump’s economic policies

At a time when the economic policies proposed by US President-elect Donald Trump, from mass deportation of illegal immigrants to imposing new duties on all American imports, threaten to increase inflation rates in the United States over the next year.
“Growth is certainly stronger than we thought, and inflation is up slightly, so the good news is that we can take a more cautious approach,” Jeremy Powell said.
At a time when Federal Reserve officials are seeking to reach interest rates to the so-called “neutral” level, so that it does not increase or restrict economic growth.