The Federal Reserve desperately tries to decode Trump pre-inauguration

Federal Reserve Chair Jerome Powell is tiptoeing through a minefield as Donald Trump barrels toward his second term as president.

The central bank is trying to maintain its image of neutrality while secretly bracing for the economic chaos Trump’s policies could unleash.

Powell claims the Fed won’t speculate on Trump’s plans, but insiders reportedly say a different game is being played behind the scenes.

After Trump’s November win, Powell went on the defensive, insisting the Fed wouldn’t adjust interest rates based on “guesswork” about future trade and immigration policies.

“We don’t guess, we don’t speculate, and we don’t assume,” Powell announced at a press conference. But as the dust settles, the Fed’s actions suggest otherwise.

Trump’s upcoming term is already affecting its inflation forecasts and interest-rate decisions.

Fed’s mixed signals

Last week, the Fed cut rates by another quarter point, making a full percentage point cut since September. Powell’s message was that the economy still needs some help.

But projections released alongside the cut show a more hawkish stance for the future.

Officials are now predicting only two rate cuts in 2025 and two more in 2026, down from earlier expectations of four cuts next year. The inflation numbers don’t help.

The Fed now expects inflation (excluding volatile food and energy prices) to dip to 2.5% in 2025, worse than the 2.2% forecast just months ago.

And here’s the thing: 15 out of 19 Fed officials now believe inflation could overshoot their forecasts. Back in September, only three saw that risk.

Behind closed doors, Fed officials are sweating over the potential for Trump’s trade and immigration policies to undo recent progress.

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