America: Fed's Ability to Maintain Interest Rates from the End of 2024

On March 18, the Federal Reserve (Fed) began a two-day interest rate meeting. The meeting is expected to see little volatility amidst growing concerns about economic growth, inflation, and instability in trade. Most analysts expect the Fed to keep interest rates at a level of 4.25-4.50%, a level that has been maintained since December. Since returning to power in January, President Donald Trump has continuously adjusted the timing and level of tariffs imposed on major trading partners such as Canada, China, and Mexico, as well as threatened retaliatory tariffs against other countries. These moves have raised concerns in the markets about the stability of the economy, while consumers and businesses are worried about the impact on inflation, which remains above the Fed's long-term target of 2%. According to the plan, after the meeting on March 19, the Fed will also announce the latest economic forecasts along with the interest rate decision. In previous reports, the Fed forecasted that it would cut interest rates twice in 2025 and that inflation would remain above the target this year and next. Many analysts predict that the Fed will slightly raise its inflation forecast for 2025 and lower its economic growth forecast. According to data from CME Group, financial markets currently believe there is a 50% chance that the Fed will cut interest rates by 0.25 percentage points in June. The Trump administration's trade policy, streamlining of the civil service, and immigration plans could push inflation up and hinder economic growth, complicating the Fed's efforts to bring inflation back to its long-term target of 2% while maintaining a healthy labor market. It seems that the Fed policymakers want to wait for clearer information on the economic impact of the new administration's policies before considering a rate cut.