US Fed Policy: Will Donald Trump’s tariff chaos pinch Jerome Powell? Interest rate to ‘dot plot’—5 indicators to watch | Stock Market News
Source: Live Mint
US Fed Policy: The US Federal Reserve is all set to announce its monetary policy decision on March 19, after a two-day review meeting to deliberate on the central bank’s benchmark interest rate and the state of the US economy. This is the second policy verdict by US Fed Chair Jerome Powell-led Federal Open Market Committee (FOMC) for 2025 and holds significance after US President Donald Trump’s tariff hikes escalated a potential global trade war.
According to Wall Street analysts, Trump’s tariff policies also threaten the pace of US economic growth, and US inflation can likely quicken due to rising price pressures in the next few months.
Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services
The Fed chair, while suggesting future rate trends, always say that it will depend on ‘ incoming data and evolving outlook’. This time the emphasis will be on evolving outlook since the present data is stable but the evolving outlook is totally unpredictable thanks to the trade war.
The Fed is likely to keep the rate unchanged in its decision on Wednesday.
The 2024 December dot plot indicated two rate cuts in 2025, down from four in September. A slowing US economy might warrant more cuts but the Fed is unlikely to indicate so since it will be in a tight spot if the US economy moves towards stagflation, which is a likely scenario.
US Department of Labor data last week showed the consumer price index (CPI) rose 2.8 per cent annually in February, below the 2.9 per cent forecast from economists polled by Reuters. On a monthly basis, US inflation rose 0.2 per cent after accelerating by 0.5 per cent in January.
