Federal Reserve Responds to Trump Tariffs with Potential Rate Cuts

The Federal Reserve is poised to adjust its monetary policy in response to the recent tariff impositions by former President Donald Trump, which have reignited concerns about inflation and economic stability. According to reports from The New York Times, Bloomberg, The Wall Street Journal, and Barron's, traders and investors are now anticipating up to five interest rate cuts by the Fed in 2025.

The tariffs, aimed at protecting domestic industries, have led to increased costs for businesses and consumers, prompting fears of rising inflation. In response, the Federal Reserve, under the leadership of Jerome Powell, is considering lowering interest rates to mitigate these effects and stimulate economic growth.

Market reactions have been swift, with investors adjusting their portfolios in anticipation of the Fed's moves. The potential rate cuts are seen as a necessary measure to counteract the economic pressures caused by the tariffs, although some analysts warn of the risks of overstimulating the economy.

• Donald Trump
• Federal Reserve
• Jerome Powell

Detailed

Trump’s Trade War Raises Bar for Fed Rate Cuts

11 hours ago

- nytimes

Traders Are Betting on Five More Fed Cuts on Recession Fears

13 hours ago

- bloomberg

Investors Now Expect Five Fed Rate Cuts This Year

23 hours ago

- wsj

Fed's Powell says larger-than-expected tariffs likely to boost inflation, slow growth

3 days ago

- reuters

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What is the US interest rate?

Futures markets expect the Fed to cut its key interest rate at four straight meetings from June through October, reducing the rate from a range of 4.25% to 4.5% to a range of 3.25% to 3.5%. Powell's remarks suggest officials may be more cautious about lowering rates.

Is the Fed going to cut interest rates?

Markets now expect four quarter-percentage-point interest rate cuts from the Fed this year versus three before Trump's announcement of tariffs that could tax imports an average of as much as 27% by some estimates, versus about 2.5% at the end of the Biden administration.

How do tariffs impact interest rates?

In terms of monetary policy, tariff hikes without more tax cuts and uncertainty suppressing spending would call for more interest rate cuts compared with the baseline. But if the tariff shock is more inflationary, the Fed could be forced to put rate cuts on hold for an extended period.