Fed Unlikely to Cut Rates Amid Inflation Concerns Linked to Trump’s Policies

The Federal Reserve may delay interest rate cuts or even consider hikes as inflationary pressures rise due to President Donald Trump’s economic policies, despite strong macroeconomic indicators, according to experts, CE Report quotes Anadolu Agency

James Knightley, international chief economist at ING, noted that the Fed’s 100-basis-point rate cut last year set a high bar for further easing. He emphasized that additional cuts would require clear signs of economic weakness and declining inflation, but Trump’s policies complicate this outlook.

“While Trump’s low corporate taxes and deregulation may boost growth, tight immigration policies and trade tariffs could increase costs and delay rate cuts,” Knightley said. He warned that trade protectionism and labor shortages in sectors like agriculture and construction could add to inflation pressures.

Fed officials typically incorporate government policies into forecasts only after they are implemented, but Knightley noted that Trump’s recent re-election and divergent policy plans may force earlier consideration.

Felix Schmidt, senior economist at Berenberg, described the US economy as “robust,” with stable employment and persistent inflation. He added that Trump’s plans for fiscal loosening, higher tariffs, and stricter immigration controls could further drive inflation.

“There seems to be little room for rate cuts, and in extreme cases, a hike could occur this year,” Schmidt concluded.