Will the Fed resist Trump's demand for rate cuts this year

The Federal Reserve plans to maintain its benchmark interest rate during its upcoming meeting, even as President Donald Trump calls for lower rates. Inflation stands at 2.4%, above the 2% target, while core inflation has risen 2.8% over the past year. Jerome Powell, the Fed Chair, aims to control inflation without causing a recession. The Fed reduced the key rate to 4.3% in late 2024, with indications of only two possible rate cuts this year. A possibility of a rate cut in March exists, but it has a low likeliness. The current 30-year mortgage rate dropped just below 7%, indicating persistently high borrowing costs despite reductions by the Fed. Trump’s administration considers 25% tariffs on imports from Canada and Mexico and mass deportations, which could influence inflation and production capacity. The Fed could reassess the labor market in its forthcoming statement, particularly due to positive employment reports showing a decrease in the unemployment rate to 4.1%. These factors may suggest that minimal rate adjustments are necessary moving forward.

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