US Federal Reserve set to cut interest rates as Trump prepares for second term

The US Federal Reserve is widely expected to announce a quarter point cut to its key lending rate on Wednesday despite a recent uptick in inflation, in the central bank’s last meeting of Joe Biden’s presidency.

The Fed is also tipped to signal a slower path of cuts going forward amid uncertainty over the impact of president-elect Donald Trump’s economic proposals.

The meeting on Tuesday and Wednesday is the last Fed rate decision before Biden leaves the White House on January 20, handing the keys back to the Republican Trump for a second term. Analysts expect major policy changes.

“The Fed is expected to be more gradual in its easing of monetary policy in view of the policies that will be put in place by the [Trump] administration,” said Gregory Daco, chief economist at EY, adding that he still expects policymakers will vote for a rate cut at the meeting.

While the Fed has a mandate to act independently of Congress as it tackles inflation and unemployment, it still has to consider the effects of the government’s fiscal policy on the world’s largest economy.