Sun Nov 10 06:49:07 UTC 2024: ## US Fed Cuts Rates, But Trump’s Return Casts Shadow on Future Policy

The US Federal Reserve (Fed) lowered its benchmark interest rate by 25 basis points on November 7th, bringing it to 4.50 – 4.75 per cent. While the move was expected, markets were disappointed by Chair Jerome Powell’s cautious tone, suggesting uncertainty about future rate cuts.

The Fed’s decision reflects a continued focus on bringing inflation down towards the 2 per cent target, with the job market showing signs of easing. Experts anticipate further rate cuts through 2026, aiming for a benchmark rate of 2.75 to 3.00 per cent.

However, Donald Trump’s return to the political scene adds a layer of complexity to the Fed’s policy outlook. Trump’s past criticisms of Powell and his potential influence on fiscal policy – like aggressive tariffs and tax cuts – could drive up inflation and long-term interest rates, potentially hindering the Fed’s ability to cut rates.

While Powell reiterated his commitment to the Fed’s independence and dismissed the impact of the presidential election on near-term policy decisions, experts are concerned about Trump’s potential influence on the central bank. Despite legal protections, Trump could attempt to appoint loyalists to the Fed’s board of governors, particularly the chair position, which becomes vacant in 2026.

Despite the uncertainty surrounding Trump’s potential influence, experts expect the Fed to continue focusing on inflation and growth data to determine future rate adjustments.

Meanwhile, India’s Reserve Bank (RBI) is expected to remain on hold in its December policy meeting due to high inflation. Most experts anticipate a rate cut in February 2025, contingent on inflation easing and economic growth remaining stable.

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