The U.S. Federal Reserve is expected to hold interest rates steady on Wednesday as it awaits further inflation and jobs data and more clarity on the economic impact of President Donald Trump’s policies before deciding whether to cut borrowing costs again.
Trump, who has already said interest rates should be lowered regardless while asserting he knows more about the matter than Fed policymakers, has in his first week in office provided a foretaste of the potential disruption ahead.
Since being sworn in as president for a second time on Jan. 20, Trump has rolled out dozens of executive orders, including one on Monday that halts some federal spending — an unexpected fiscal shock that could deliver a blow to consumption and growth.
He also has ramped up deportation of immigrants and threatened 25 per cent import tariffs on goods from Canada and Mexico as soon as Saturday, moves that most economists see as more likely to aggravate inflation than contribute to cooling it further.
The U.S. central bank is scheduled to release its latest policy decision and statement at 2 p.m. ET with Chair Jerome Powell due to hold a media conference half an hour later to elaborate on the meeting.Â
Investors and many economists still expect the Fed to reduce interest rates later this year, but the watchword for policymakers for now may be caution until they are more certain inflation will fall to the central bank’s two per cent goal and the details of Trump’s tariff, tax and spending plans are known.
The Fed cut its benchmark policy rate by a full percentage point over its final three meetings of 2024, but officials agreed at their Dec. 17-18 gathering that they were “at or near the point at which it would be appropriate to slow the pace of policy easing,” according to minutes of the session.
