Dollar rebounds despite Fed independence worries; euro slips
Investing.com - The Federal Reserve is not expected to slash interest rates again until the next quarter, as officials grapple with uncertainties around lingering inflationary pressures and the impact of Trump administration policy changes, according to a poll conducted by Reuters.
Economists participating in the survey were divided over when the Fed would next slash rates, Reuters reported. A previous poll in January found that almost 60% expected the central bank to roll out a reduction in March.
But roughly two-thirds of the forecasters are now predicting at least one rate cut by the end of June, while 22 of the 101 polled see a drawdown in March and 45 in the second quarter, Reuters said.
Meanwhile, 17 of 99 economists with projections until the end of 2025 anticipated the next cut will come in the second half, and 16 see no reductions this year, the news agency added.
Uncertainty has swirled around the outlook for Fed monetary policy, with observers estimating a wide range of possibilities for 2025. Interest rates, which currently stand at a rate of 4.25% to 4.5%, are seen falling to as low as 3.00% to 3.25% and even rising to 4.5% to 4.75%.
Underpinning the murky picture has been indications that inflation remains above the Fed’s stated 2% target level despite cooling in recent months. Signs of a resilient labor market have also contributed to policymakers opting to take a wait-and-see approach to rate decisions, pushing pause on a cycle of borrowing costs cuts that began last year.
U.S. President Donald Trump’s threats to impose sweeping tariffs on friends and foes alike -- and the possible impact of these measures on inflation -- have fueled much of the Fed’s caution as well. On Monday, Trump imposed 25% levies on all steel and aluminum imports, and has suggested he could introduce reciprocal tariffs on Tuesday or Wednesday.
"[W]ith broader reciprocal tariffs also on the table, tariffs are still set to boost U.S. inflation and weigh on global growth this year," said Jennifer McKeown, Chief Global Economist at Capital Economics, in a note to clients.