Trump's Election Victory Puts Fed On Path For Fewer Rate Cuts

• U.S. President-elect Donald Trump's impending return to the White House appears to put the Federal Reserve on a slower and shallower path for interest rate cuts, with a slew of new policies embraced by the Republican leader poised to juice the economy and stall or reverse, the slowdown in inflation.
• U.S. central bankers are still widely expected to cut the Fed's benchmark interest rate by a quarter of a percentage point to the 4.50%-4.75% range when they wrap up their two-day policy meeting on Thursday.
• Futures contracts tied to the Fed's policy rate are also pricing in a December rate cut, though with slightly less confidence than previously, as the central bank recalibrates borrowing costs to inflation that's now much closer to its 2% target and to a cooling labor market.
• However, in a shift that could be consequential for businesses and households looking to refinance debt or borrow anew, traders are now betting the Fed will cut its policy rate only twice in 2025, lowering it to the 3.75%-4% range and likely taking until July to do so.
• If those bets bear out, the end of the Fed's current rate-cutting campaign would come more than a year sooner, and its policy rate would be a full percentage point higher than most Fed policymakers had projected after their initial rate cut in September.
• Trump campaigned on promises to fix what he sees as an ailing economy and plans to impose higher tariffs, reduce taxes, and launch an immigration crackdown to do that. Economists say those policies are likely to lead to faster economic growth and a tighter labor market that, along with the higher import costs, would put upward pressure on prices. Several Wall Street economists on Wednesday cited those risks as they penciled in fewer Fed rate cuts next year.

(Source: Reuters)