The US Federal Reserve (Fed) is expected to announce a pause in interest rate cuts after its two-day meeting on January 28-29, as policymakers continue to try to curb inflation.
The Fed cut its key lending rate by a total of 1% over the last four months of 2024 and said it would act more cautiously in the future as inflation exceeds its long-term 2% target.
Jim Bullard, former president of the St. Louis Fed, said the Fed would not make any adjustments and he thought the Fed should keep its current policy.
The Fed's challenge now is how to communicate a data-driven approach to future rate cuts without provoking a reaction from President Donald Trump, who has publicly expressed a desire for lower rates.
Data from CME Group shows that financial markets predict there is a more than 99% chance that the Fed will keep interest rates at their current levels, between 4.25% and 4.50%, at the meeting.
Fed policymakers reduced their expected number of rate cuts in 2025 to an average of just two, according to minutes from their December meeting, and some factored assumptions about Mr. Trump’s likely economic policies into their forecasts.
Since returning to power, President Trump has revived threats of tariffs on U.S. trading partners, including Mexico, Canada and China. He has also expressed a desire to extend expired tax cuts and reduce red tape in energy production.
Many economists say Mr Trump's tariff and immigration proposals could fuel inflation and potentially force the Fed to hold off on rate cuts for longer if the policies take effect.