Fri Nov 08 05:37:26 UTC 2024: ## Fed Poised for Second Rate Cut, But Trump’s Policies Cloud Future

**WASHINGTON (AP)** – The Federal Reserve is set to lower interest rates for the second time this year on Thursday, citing a slowdown in inflation. However, the election of Donald Trump has added a layer of uncertainty to the Fed’s future decisions.

Trump’s economic policies, including proposed tariffs and tax cuts, are widely considered to be potentially inflationary. This could limit the Fed’s ability to further cut rates, which are intended to stimulate the economy.

The Fed, traditionally independent from political interference, has been criticized by Trump in the past for raising rates. Fears of renewed attacks from the president are looming.

While the economy shows signs of strength, with solid growth and healthy consumer spending, hiring has slowed. This creates a conflicting picture for the Fed, which may face pressure to pause or stop its rate cuts if inflation rises again.

Adding to the complexity, recent market movements have pushed up borrowing costs despite the Fed’s rate cuts. Investors, anticipating higher inflation and faster economic growth under Trump, have driven up Treasury yields. This has negated some of the benefits of the Fed’s actions, especially for consumers seeking mortgages and car loans.

Trump’s proposals, particularly his proposed 10% tariff on all imports, could push inflation to around 2.75% to 3% by 2026, according to economists at Goldman Sachs. This would likely prompt the Fed to abandon its planned rate cuts.

While the Fed initially envisioned several more rate cuts in the coming years, investors are now less confident about this scenario. The possibility of a rate cut in January has dropped from nearly 70% to just 28% in the past month.

The Fed’s challenge lies in balancing the need to stimulate the economy with the potential risks of inflation. The path forward for the central bank remains uncertain, but the election of Trump has certainly introduced new variables to the equation.

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