The interest rate decision … an early test between the “federal” and Trump

Today, global markets are awaiting the decision of the US Central Reserve Bank on interest rates, at its first meeting during 2025, and under the second term of US President Donald.
According to data and analyzes, the American federalism is expected to stop today “temporarily” a reduction in a time when policymakers are looking to continue to treat inflation.

Upon price expectations

Analysts expect to keep interest rates at their current level between 4.25% and 4.50%, amid attempts to communicate the approach to relying on data on future discounts to avoid what analysts indicated “provokes Trump’s anger”.
The President of the US Federal Reserve, Jerome Powell, will hold a press conference after the Central Bank’s decision on interest.
According to the analysts, with the weighting of a new reduction by March or May 2025 if the inflation persists. Employment data and US economy growth still play a major role in directing federal decisions in the coming period.

3 discounts

Last year witnessed 3 consecutive discounts for interest rates, as the federal began in June 2024 the first reduction by 25 basis points after inflation was stabilized near the target of 2%, then the discounts continued in September and December to reduce monetary restrictions on the economy.
These moves came after a tightening cycle that lasted since 2022, as the Federalism raised the interest sharply to curb inflation, which reached its climax at 9.1% in 2022.

Jerome Powell

The markets will await the references of Jerome Powell, the head of the federal, about the future of monetary policy, as any hints to a close reduction may push stocks to rise, while maintaining the “waiting and anticipation” approach may lead to the stability of bond returns and the continued strength of the dollar.

US President Donald Trump has criticized the Federal Policy during his first term (2017-2021), as Trump, Jerome Powell, has repeatedly attacked the interest, even described the federal as “the biggest threat to the American economy.”

Donald Trump

As he returns to the White House, attention is turned to whether Trump will again try to pressure the federal to reduce interest at a faster pace to support economic growth, especially as he pledged his campaign to launch a “new economic revolution.”

Although the federal has official independence, the markets expect that Trump’s economic policies will affect his monetary directions, as the new president focuses on stimulating growth by lowering taxes, increasing spending on infrastructure, and alleviating organizational restrictions, which may lead the federal to wait to reduce The benefit if it leads to high inflation or unexpected growth.

Early victory

And if the federal decides to keep the benefit as it is today, it is not unlikely that Trump will comment through his platform “Truth Social” or at a press conference, perhaps criticizing the decision and calling for faster moves to support the economy. But if Jerome Powell hint on the possibility of reducing interest soon, Trump may consider this an early victory for his economic policy.
Today’s meeting is an early test of the relationship between the federal and the new Trump administration, and market monitors will be awaiting any signals on the extent of Trump’s impact on monetary policy, and whether the federal will resist political pressure to maintain his independent strategy.
And if the federal indicates that the interest is kept high for a longer period, this may lead to the rise of the dollar and pressure on the stock markets, especially in the emerging markets that depend on capital flows. And the opposite is true, if the federal hints to reduce interest soon, this may support stock markets and pressure the dollar.

Federal

Although inflation declined in 2024, the prices are still higher than before the bacterium levels, which drives the federal to be careful before reducing the interest.
Jerome Powell’s statements will be decisive in determining the market expectations for the number of potential discounts during 2025, especially since the markets were expecting 3-4 discounts, but the recent data may push the federal to rethink.