The American Central Bank, after the ECB, is ready for another cut in the cost of money, to the delight of the president-elect who has always opposed excessively high rates. But things could change in the future
17/12/2024
The last move of the Federal Reserve, before the curtain falls on the era of Joe Biden and opens, for the second time, that of Donald Trump. Six days after the fourth cut in the cost of money by the European Central Bank, spending on deposits is now at 3%, even the main and most important monetary institution in the world is ready to give another crank to rates, now that inflation in the United States is under control. Precisely to the delight of the next occupant of the White House, who has always made monetary easing one of his battles. So much so that, during the first administration, he came into conflict several times with the number one of the Fed, Jerome Powell.
And now it’s Powell’s turn to lift the veil on the US interest rate in the last meeting of the year. The response is scheduled for December 18th. On that occasion, the market and analysts are taking into account the third cut in a row, the second of 25 basis points, after an initial cut of half a percentage point. Rates would thus move from the 4.50%-4.75% range to the new 4.25%-4.50% range. This is for a specific reason: US economic data, starting with the cost of living, have remained relatively positive since the last Fed meeting in November.
Question: What will the US Central Bank’s approach be with Trump’s return? Economists have few doubts: the Fed will have a more cautious approach on rates, for fear that the policies of the next US president could increase inflation. The almost certain new wave of duties, in fact, will impact the cost of goods entering the USA.
According to most experts, rates will be at 3.5% or higher at the end of 2025, while in September they were convinced that they would be brought below this threshold. One thing is certain, Trump will not try to remove the president of the Fed, whose mandate expires in May 2026. The president-elect himself revealed this during an interview with Nbc Newsa few days ago. In fact, when he was asked if he intended to replace the number one at the Federal Reserve prematurely, he replied: “I won’t.”
But the year will then end with a general cut in the cost of money. After the Federal Reserve, it will be the turn of the central banks of Japan (19 December) and China (20 December). In Asia, reductions could be announced in Beijing, but not in Tokyo, where a choice of unchanged rates for new increases in the new year is likely. The case of Thailand is different, where rates should instead be left unchanged. Even in Australia, the possibility of reducing rates is not ruled out.
