Rabo: Trump 2.0 Means Fed Pause on Cuts Likely
Trump’s return to power implies a major shift in US economic policy.
Trump 2.0- US special
Summary
Trump’s return to power, backed up by Republican majorities in the Senate and probably the House of Representatives, implies a major shift in US economic policy.
Trump is likely to raise tariffs which could cause a rebound in inflation and a slowdown in economic growth. The negative impact on growth could be mitigated by tax cuts and deregulation by a Republican Congress. However, this would increase the budget deficit and reinforce inflation, especially in combination with reduced immigration.
For the Fed this means that a pause in the cutting cycle is likely in 2025. This would increase tensions between Trump and Powell and would give the US President additional incentive to challenge the Fed’s independence.