Former New York Fed President: Powell may need to respond positively to the impact of Trump's policies next week
According to the report from Gold Ten, former New York Fed President Dudley wrote that Federal Reserve Chairman Powell will have to directly respond to the impact of Trump's policies on monetary policy at the upcoming FOMC meeting next week. The Fed considers four conditions for policy changes: high probability of policy change, significant impact on the economy, clear policy content, and financial markets have started to expect it. Based on this, the Fed may include the 2017 tax cut policy extension in its forecast, but will not consider the uncertain impact of tariffs and immigration policy for now. The latest Summary of Economic Projections (SEP) is expected to show: the economic outlook for 2025-2026 is slightly stronger than in September, reflecting the continued momentum of the economy and higher productivity growth; the rate cut in 2025 may narrow to 50-75 basis points (previously expected to be 100 basis points); the neutral interest rate may rise to 3% or higher, but lower than the futures market expectation; inflation is expected to fall back to the 2% target by 2026. Dudley emphasized that if Trump's tariff and immigration policies become the focus, the economic outlook may turn pessimistic.
