What’s Ahead For The Federal Reserve In 2025? | Global News Avenue

No one knows for sure what will happen at the Fed in 2025, least of all officials at the Fed itself.

After cutting interest rates three times in as many meetings, the Fed The fight against inflation enters a new stage Enter 2025. Fed Wait and see What will happen with inflation, whether incoming President Donald Trump will impose steep tariffs, and what impact those tariffs will have on the economy. Not to mention that tax policy, regulations and many other factors may change as the government shifts to Republican control in January.

At a news conference after the Fed announced its latest policy in December, Chairman Jerome Powell used the word “uncertain” or “uncertainty” 14 times.

“The uncertainty is just a function of what we expect to be significant changes in policy,” he said. “It’s nothing out of the ordinary. I think we need to look at what they are and see what impact they will have.”

Inflation remains stubborn, Trump’s proposals may not help

At least one thing remains certain: Inflation remains above the Fed’s 2% annual target, rising by 2.4% based on the Fed’s preferred indicator. Next year, the Fed will work to lower unemployment while preventing a serious rise in unemployment.

Achieving these two goals is a balancing act because the Fed’s primary tool is manipulation federal funds rateaffecting the borrowing costs of various loans. Higher federal funds rates can slow the economy and lower inflation, but they can also hurt the job market.

The Fed cut the federal funds rate from a two-decade high in September and has lowered it by a full percentage point over the course of three meetings. Central bankers expect more rate cuts next year, but at a much slower pace. According to Fed officials’ latest round of economic forecasts, they expect the benchmark interest rate to be cut by just three-quarters of a percentage point throughout the year.

Of all the potential changes brought about by the new presidential administration, the Fed is particularly focused on tariffs. Trump says he will impose high import taxes on U.S. trading partners, but Details of the plan are unclear.

Economists say tariffs could stoke inflation as businesses pass costs on to customers. It could also slow economic growth and reduce employment, complicating the Fed’s goals of stabilizing rising prices and unemployment.

Trump vs. Trump. Powell, second round?

The new year could also bring political conflict between the Fed and the White House.

Trump frequently criticized Powell during his first term as president, attacking him for keeping interest rates higher than Trump wanted. Although Trump said he would Don’t try to fire Powell Before his term ends in 2026, he has expressed a desire to have greater influence on the central bank’s policy decisions.

Powell has push back Oppose this view, insisting that the further the Fed is removed from the direct control of politicians, the more efficient it will be.