Tickmill foreign exchange platform: Trump policy raises inflation concerns, the pace of interest rate cuts may slow down!

Minutes of the Federal Reserve's January 28-29 policy meeting released on Wednesday showed that President Trump's policy proposals have raised concerns at the central bank about rising inflation.Tickmill Forex PlatformPolicymakers generally agree that trade policy, changes in immigration policy and geopolitical risks could push up inflation, while companies generally say they will pass on the cost of import tariffs through price increases. This uncertainty makes it less likely that the Federal Reserve will cut interest rates in the short term.

Inflation risks rise, and pressure on companies to raise prices increases

Fed policymakers "generally pointed to upside risks to the inflation outlook", particularly the potential disruptions to supply chains caused by changes in trade and immigration policies that could push up prices, according to meeting notes. Business contacts in several regions said they planned to pass on the costs of potential tariffs to consumers. In addition, some measures of inflation expectations "have risen recently", further adding to the Fed's concerns.

Interest rate cut expectations postponed, market reaction muted

While the Fed remains confident that price pressures will ease in the coming months, the financial marekt was muted following the release of the meeting notes. The interest rate futures market expects the Fed to make its first, and perhaps only, rate cut in 2025 in July. Policymakers agreed that rates should be kept on hold until inflation falls significantly towards the 2% target. Ryan Sweet, chief U.S. economist at Oxford Economics, noted that the Fed is likely to wait until the dust settles on tariffs before providing clearer forward guidance, with only one rate cut expected in December this year.

Policy framework review launched, inflation target unchanged

The Fed began its review of its policy framework at its January meeting, which is expected to conclude in late summer. Policymakers made it clear that they would not change their commitment to their 2 per cent inflation target or to achieving full employment. Moreover, "a number" of policymakers suggested that it might be appropriate to consider slowing or pausing the process, given that the debt ceiling issue could lead to large swings in reserves, according to meeting notes.

Summary: Inflation concerns dominate policy direction, and the pace of interest rate cuts may be more cautious

The uncertainty over Trump's policies has heightened the Fed's concerns about rising inflation and reduced the likelihood of a short-term interest rate cut. The Fed will continue to closely monitor inflation trends and seek more flexible tools to address latent risks in its policy framework review. In the future, as trade policy and economic conditions become clearer, the Fed's policy path may become clearer.