The Federal Reserve is expected to cut interest rates next month, and with Trump's policy, the market's expectation for the Fed's rate cuts by the end of 2025 has been halved.
The economy is rising, inflation is not coming down, and the stock market is reaching new heights every day. These conditions make the Fed cautious about making any drastic moves to cut rates. Fed Chairman Powell stated last week: "The economy hasn't given us any urgent signals for a rate cut."
Nearly 90% of economists believe that the Fed will cut rates by 25 basis points in December, but the market pricing shows that the probability of a rate cut in December is less than 60%. There is still a belief that the Fed will cut rates in December; the data looks decent, but the market feels that the U.S. economy is too strong and inflation remains high. The Fed is unlikely to cut rates as significantly as we previously thought because they have to keep an eye on inflation.
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