President Donald Trump’s inauguration looms over the Federal Reserve

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Donald Trump’s economic plans are a sticking point for the US Federal Reserve and Chairman Jay Powell.

The central bank cut interest rates by a quarter of a percentage point yesterday, but officials also said they expect fewer rate cuts next year as they begin to factor in President Trump’s economic proposals (free to read).

Chairman Jerome Powell rattled financial markets yesterday by striking a very cautious tone about how far banks can cut interest rates amid rising inflation risks.

A few months ago, Fed officials had planned to cut interest rates by the equivalent of 1 percentage point through 2025, but they now expect to cut rates by only two quarter points this year, reflecting policymakers’ concerns about persistent inflation. is highlighted.

It also raised its inflation expectations for next year, citing concerns that President Trump’s policies could lead to higher prices, lower growth and more volatility.

“This was an unabashedly hawkish message from the Fed,” Aditya Bhave, senior U.S. economist at Bank of America, told the FT’s Colby Smith, adding that in 2025, It added that officials’ expectations for another quarterly rate cut represented a “massive shift.”

Chairman Powell said at a news conference yesterday that some members of the Federal Open Market Committee, which decides interest rates, have begun considering the potential impact of President Trump’s proposal.

“Some have suggested that policy uncertainty is one reason to consider more uncertainty around inflation,” Powell told reporters.

“We don’t know anything about the actual policy,” he says. “We don’t know what tariffs will be imposed on, by which country, for how long, or to what extent. We don’t know whether retaliatory tariffs will be imposed or not. We don’t know how that will affect consumer prices. I don’t know.”

Dean Maki, chief economist at Point72, called the change “shocking” and rooted in speculation about President Trump. “It’s hard to understand why they expected the rate to go up.” ”

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what we are hearing

The pace of President Trump’s meetings with U.S. CEOs is accelerating as business leaders bend to secure time with the president-elect, even if they disagree on policy.

One Washington lobbyist told the FT’s James Politi and James Fontanella-Kahn:

It will take a lot of effort for very wealthy, creative types of CEOs, many of whom are left-leaning, to absorb that and deal with Trump.

But what options do they have?

Within President Trump’s orbit, numerous meetings have been cast as votes of confidence in his incoming administration and economic policies. However, American businesses still have serious concerns about the president-elect, particularly his plans to impose sweeping tariffs, pursue mass deportations, and roll back some manufacturing subsidies. are.

Whatever their real thoughts, government leaders have learned an important lesson. That means it’s better to satisfy Trump’s enthusiasm and desire for flattery than to criticize him and risk public rebuke and retaliation.

Nikki Haley, a former U.N. ambassador who ran against Trump in the Republican primary, told the FT: “I don’t speak to CEOs who are afraid of Trump.”

“I don’t think it’s fair to say that Trump is going to be a big deal,” said the current vice chair of Edelman, a consultancy that advises companies on how to deal with President Trump.

What I’m telling CEOs is it’s good to have FaceTime with President Trump. It’s good to let him know what you’re working on. It’s good to let him know how you are growing your business.

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