Former Fed Policymaker Mester Sees Fewer Rate Cuts Next Year After Trump’s Victory  

• The U.S. Federal Reserve could carry out fewer interest rate cuts than previously expected next year should President-elect Donald Trump’s proposed global tariffs take hold, former Fed policymaker Loretta Mester said Tuesday.
• Mester indicated that the Fed’s outlook was set to change under the incoming Republican administration’s fiscal plans and that markets may be right in forecasting fewer than the four reductions previously forecasted. “Next year, the pace of the cuts will be affected by where they’re seeing fiscal policy,” she said during a panel at the annual UBS European Conference hosted in London.
• Trump vowed during his election campaign to intensify a trade war that began during his first term in office. Economists have warned that such measures could be inflationary. As a result, markets are now expecting 1 percentage point of cuts in the first half of 2025, followed by a further 25 basis point reduction in the second half of the year, according to median poll forecasts cited by Reuters.
• Economists polled by Reuters also expect a 25-basis point cut at the December 2024 meeting. That would take the fed funds rate to 3% to 3.25% by the end of 2025, slightly below the central bank’s median “dot-plot” projection.

(Source: Reuters)