Fed postpones rate cut: inflation and tariffs change forecasts

The US Federal Reserve is not likely to lower its key interest rate until the second quarter, although it was previously assumed that this decision could be made in March. Inflation forecasts have been rising since the election of Donald Trump as President of the United States. Economists believe that his tariff policy increases price pressure.  

From September to December, the Fed reduced the rate by 100 basis points, but now its representatives, including Chairman Jerome Powell, are in no hurry to make further changes. The U.S. economy remains stable due to a strong labor market and robust consumer spending, which reduces the need for additional measures.  

At the same time, Trump continues to impose duties, including 25% on steel and aluminum imports. Experts warn that tariffs can not only stimulate inflation, but also slow down economic growth. In this situation, the Fed will prefer to bide its time.  

While in January 60% of economists expected a rate cut in March, now two thirds predict this event by the end of June. Only 17 out of 99 respondents assume that a reduction will occur in the second half of the year, while 16 believe that there will be no rate correction at all. Futures on rates estimate the probability of their reduction by the middle of 2025 to be slightly above 50%.