At the December Federal Reserve meeting, officials expressed concerns regarding inflation and the economic implications of President-elect Donald Trump’s policies, leading to a cautious approach toward future interest rate cuts. Although Trump was not specifically mentioned, discussions highlighted potential changes in immigration and trade policies that could impact the economy. Following his election, Trump signaled intentions for aggressive tariffs and deregulation, heightening the uncertainty surrounding economic forecasts. Consequently, the Federal Open Market Committee (FOMC) chose to lower the benchmark borrowing rate to a range of 4.25%-4.5%. However, they revised their projections for rate cuts in 2025 from four to two, reflecting a slower anticipated pace in light of rising inflation risks. The FOMC members noted that inflation rates were above the target 2%, with core inflation at 2.8% in November, complicating future monetary policy decisions. Chair Jerome Powell emphasized the need for a careful, gradual approach in navigating the current economic landscape, likening it to “driving on a foggy night.” Overall, officials concluded that the economic environment warranted a measured response to unfold as data evolves.
