The Fed is expected to lower interest rates by 25 basis points today, but Trump’s victory has brought potential shifts in future rate outlook into focus

The US Federal Reserve is expected to cut interest rates by 25 basis points to a range of 4.50%-4.75% at the conclusion of its two-day policy meeting today.

While markets still anticipate another rate cut in December, initial expectations for a more extended easing phase have started to wane. This is due to inflation nearing the Fed’s 2% target and a cooling labor market, both of which prompt a reevaluation of the Fed’s monetary policy stance.

Another influential factor on the Fed’s rate path is Donald Trump’s recent election victory. His proposed policies, if enacted upon his return to the White House, are expected to provide a substantial boost to the economy, potentially slowing or reversing the current downward trend in inflation.

As a result, market expectations have adjusted, now pricing in only two rate cuts in 2025, which would bring rates to a range of 3.75%-4.00%.

Supporting this shift in policy outlook is stronger-than-expected economic data in recent months, indicating solid economic conditions that could lead to an earlier-than-anticipated end to the Fed’s easing cycle, possibly as much as a year sooner than previously expected.

Trump’s victory and the anticipated economic measures from his administration are further reinforcing expectations for faster economic growth, reducing the likelihood of more aggressive rate cuts in the near future.