### Trump's Return Influences Federal Reserve's Interest Rate Projections

As President-elect Donald Trump prepares for his return to the White House, the Federal Reserve is reevaluating its policy on interest rates. Central bankers are expected to cut the Fed's benchmark interest rate by a quarter percentage point to the range of 4.50%-4.75% during their two-day policy meeting ending on Thursday. This adjustment is in light of recent economic shifts and a cooling labor market.

Futures markets are also anticipating a rate cut in December, though confidence in this prediction has slightly waned as the Fed adjusts to inflation nearing its 2% target. Additionally, traders now believe the Fed will implement just two rate cuts in 2025, reducing the policy rate to 3.75%-4%, likely by July. If these predictions hold, the current rate-cutting cycle could end more than a year earlier than initially projected, and the policy rate might be a full percentage point higher than anticipated during the Fed’s earlier meeting in September.

The shift in expectations has been influenced by stronger-than-anticipated economic data since September. Momentum increased significantly after Trump secured his victory over Vice President Kamala Harris, shortly after the polling stations closed on Wednesday. Trump's campaign promises—imposing higher tariffs, reducing taxes, and enforcing stricter immigration policies—are seen as potential catalysts for economic acceleration and increased labor market tightening, which in turn could elevate inflation.

Several Wall Street economists have already begun factoring in these risks, leading to forecasts of fewer rate cuts by the Fed next year. The ultimate impact of Trump's policies might unfold over the coming years, and their full effect remains uncertain. Oxford Economics analysts emphasized that delayed inflationary effects from Trump's trade and fiscal policies could permit the Fed to continue reducing interest rates into 2026, projecting a policy rate close to 3% by mid-2026. However, they noted, this outlook might evolve as Trump’s policy intentions become clearer in the months ahead.