Fed May Not Cut Rates

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Fed May Not Cut Rates

Fed May Not Cut Rates In 2025, According To Deutsche Bank

According to an expert from Deutsche Bank, the Federal Reserve is highly unlikely to lower the policy rate in 2025. Recently, the Fed has been on a rate-cut path, but it seems that it might change as we enter 2025.

Deutsche Bank believes that the easing cycle of the Federal Reserve faces serious risks. The top of line is the Trump policies which will raise the inflation levels in the country.

Fed To Pause Rate Cuts After December

According to a chief economist, December's rate cut will be followed by a brief pause. They added that the unemployment rate will go down but the growth will move higher. This will also lift the inflation which will force the Fed to pause the rate cutting cycle.

If we look ahead, there's no fear of an imminent slowdown in the US economy. This means there's less pressure on the Fed to keep lowering the policy rate. Additionally, the consumer resilience and the good jobs data also support this rhetoric.

Additionally, the policy of Trump will ensure that inflation remains above the 2.5% target. For example, higher spending and tax cuts are highly likely to drive up growth and inflation.

Trump has announced a higher tariff of 10% on Chinese goods and around 25% duty on Canada and Mexico. According to economists, the tariff costs will be directly transferred to the end consumers.

Experts also added that the Federal Reserve will also have to account for the White House policy. This means the Fed will have to keep the upcoming policies of the government when deciding about the interest rate policy.

Amidst all of this, it seems that the interest rate in the USA will be near 4.0%. An interest rate like this will be neutral and will not contribute to the shrinking or stimulation of the economy.

However, others believe that the interest rates will keep going down in 2025. Goldman Sachs is one such case as they believe that the interest rate will go down to 3.5% by the 2025's end.

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