The US Federal Reserve recently sent significantly waiting signals in terms of monetary policy and has taken a break. In view of current developments, a market expert even considers it possible that the currency keepers put on the reins again.
• Economist Torsten Sløk warns of possible Interest rate increase The Fed
• Trump’s policy as a risk
• other experts also worried
Shortly after Donald Trump’s taking office, the US Federal Reserve’s US Federal Reserve was on a confrontation course with the new US president. The monetary authorities took a break, instead of further reducing the key interest rates – as required by Trump. Inflation is still “somewhat increased”, Fed boss Jerome Powell justified the decision for the interest break. “We know that a too fast or too strong relaxation of the monetary political restrictions could impair progress in the fight against inflation,” said the economic expert.
Donald Trump had emphasized in the run -up to the decision at a speech at the World Economic Forum that he knows his way better when it comes to key interest rates than the Fed. “I think I certainly know much better than the one who is primarily responsible for this decision,” said the Republican, who in this context called for an immediate reduction in key interest rates, “when the oil prices drop”.
Does Trump even ensure an rate increase?
Now it could be Trump as an advocate of low interest rate policy, which contributes to the fact that the US Federal Reserve even takes an increase in interest. The chief economist by Apollo Global Management, Torsten Sløk, emphasized in the Opening Bid Podcast of Yahoo Finance that the US economy is already “with a healthy growth pace of gross domestic product (GDP) of 3 %” running “-supported by high share prices, investments in AI data centers such as Microsoft and Amazon Defense spending.
Trump’s customs policy is likely to increase this effect, warns the market expert that this would “further heat up the economic fire and drive up inflation”. If consumer prices continue to rise, Sløk sees this as a clear work order to the US Federal Reserve: “Against this background, we take measures that the inflation now raise from an already too high level, then I would certainly say that we may not yet be finished with the interest rate increases. There is a risk that the further year will still lead to an increase.
Possible interest rate in mid -June
As the point of time for the increase in the key interest, the economist considers the Fed session possible in mid-June. However, this could only be the first of several interest corrections: “If inflation increases significantly due to a strong economy and possibly some measures that are slightly boosting inflation, there could be several increases over the course of the year,” added Sløk.
Trump’s tariffs drive inflation
At Morgan Stanley, too, Donald Trump’s customs policy can be seen as a possible inflation driver: Higher tariffs on imports could slow down the disinflationary trend, according to analysts of the financial house in a message. “A faster introduction of tariffs than by us would probably mean that the disinflation would come to a standstill with a higher inflation rate and that each way would be blocked to cuts in the near future”. Even if tariffs were avoided, the only possibility would lead to new trading hurdles for continuing uncertainty in inflation, the market experts continued. Morgan Stanley does not have one or more possible leading increases in the cards this year, but it is apparently only expected that the Fed 2025 is one Interest rate should do. Previously, the interest rate expectations had also leveled off on an interest step this year at Barclays and Macquarie.
While you see more reluctance to the Fed in established banking houses, but other market experts are more pessimistic in this regard. Phil Suttle, former economist of the New York Fed, said in the Macro Hive podcast on January 17, 2025: “I don’t see any interest rate cuts at all. And that is not a crazy view”. He expects Trump’s politics to enforce tariffs and restrict immigration, which increases inflation. This should force the Fed to increase interest rates. And Bloomberg also quotes Roger Hallam, global director of the interest rates at Vanguard, with the words: “If we see considerable surprises in inflation in the coming months, the market could begin to play with the possibility of an increase in interest this year”.
Editor finance.net
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