The article provides an overview of the economic and financial situation in the U.S. ahead of the first meeting of the Federal Reserve (Fed) in 2025. Some key points that can be drawn from the article:
1. Interest rates and monetary policy:
The Fed has cut interest rates by a total of 1% in 2024, bringing the federal funds rate to 4.25% - 4.5%. However, this does not seem to have alleviated financial pressure for consumers, as borrowing costs remain high, especially mortgage rates.
2. Market expectations:
According to data from CME Group, the market is almost certain that the Fed will keep interest rates unchanged at this meeting, and further cuts in March may not occur if inflation remains stable and the economy stays strong.
3. Political and economic factors:
President Donald Trump has publicly urged for an immediate interest rate cut, but his policies, such as import taxes and immigration, could complicate the Fed's efforts to control inflation. This could lead to tensions between the administration and the central bank.
4. Key economic data set to be released:
• GDP Q4/2024 (January 30): Growth forecast of 2.6%, indicating a strong economy.
• Core PCE Index (January 31): Inflation forecast at 2.8% in December 2024, unchanged from the previous month. This is one of the indices the Fed pays the most attention to when deciding monetary policy.
5. Market impact:
Remarks from Fed Chair Jerome Powell are likely to cause volatility, but economists predict he will be more cautious. However, comments from President Trump and key economic data set to be released could pressure the Fed, overshadowing Powell's role in this meeting.
Overall, the Fed is facing a tough dilemma in balancing the pressure to lower interest rates from politics, the actual economic situation, and the goal of controlling inflation. The decisions and messages from the meeting will play a crucial role in shaping market expectations in the near future.