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Investing.com -- The Federal Reserve is signaling that an interest rate cut is not on the immediate horizon, according to the CEO of deVere Group, one of the world’s largest independent financial advisory and asset management organizations. This comes after the minutes from the last meeting of the rate cutting committee revealed that US central bank officials in January were prepared to maintain steady interest rates due to persistent inflation and economic policy uncertainty.
The Fed minutes also highlighted potential factors that could impact the economy, including changes in trade and immigration policy, geopolitical developments disrupting supply chains, and stronger-than-expected household spending.
Nigel Green, CEO of deVere Group, stated that the minutes from the January policy meeting seem to confirm that officials are not in a rush to ease monetary policy. He noted that the central bank’s cautious stance reflects the risk of a resurgence in inflation and current financial conditions and trade policy changes exerting pressure on policymakers to stay the course.
Green pointed out that markets had been searching for signs of a more dovish stance, especially after last week’s mixed inflation data and a significant drop in retail sales that temporarily pushed Treasury yields lower. However, the minutes seem to reinforce the Fed’s patient approach, with members expressing concern about cutting rates prematurely.
Green warned that investors betting on imminent rate cuts could be setting themselves up for disappointment. He explained that the Fed is making it clear, in his view, that inflation remains a risk, and that early cuts could backfire. Policymakers are still assessing economic data and adjusting policy, with no apparent urgency to change direction.
Adding to the complexity, the proposed tariffs by President Trump could further delay rate cuts. These tariffs could potentially push inflation higher, compelling the Fed to sustain its restrictive stance for a longer period. Protectionist policies could drive up costs for businesses and consumers, making it more difficult for the central bank to justify rate cuts in the near future.
The Fed’s reluctance to cut rates contradicts the market optimism that had been building in recent months. Investors had priced in multiple cuts, but the data-driven approach outlined in the minutes suggests these expectations may be overly optimistic.
Policymakers are focused on ensuring inflation does not significantly rebound, which means rate cuts could be delayed much further than markets had anticipated. Green emphasized that the Fed minutes confirm that policy easing will only occur when conditions warrant it, not because markets desire it. This has significant implications for investors who need to adjust their positions accordingly.
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