Fed Meeting Time: Interest Rates to Remain Unchanged

The Federal Reserve is set to meet for the first time in Donald Trump's second term, with market expectations indicating a near 100% certainty that interest rates will remain in a target range of 4.25%-4.5%, despite Trump's desire for lower rates.

Former Dallas Fed President Robert Kaplan believes the Fed should not change policy, citing disinflationary changes, including government spending cuts and regulatory review. The Fed has cut rates at each of its last three meetings, reducing its rate by 1%. However, central bankers are expected to hold firm and take a break from policy changes, despite the president's demands.

The Fed's rate decision will be released on Wednesday at 2 p.m. ET, and Chair Jerome Powell will hold a news conference at 2:30 p.m. ET. Powell's comments on key issues, such as mass deportations, the US debt ceiling, and shelter inflation, will likely move markets. The US Dollar (USD) is firm ahead of the Federal Reserve's (Fed) Federal Open Market Committee (FOMC) decision, with the target range for the Fed funds rate expected to remain unchanged at 4.25-4.50%.

Monetary policy divergence between the Fed and other major central banks continues to underpin USD strength. The FOMC's decision is not expected to be unanimous, with some members, like Fed Governor Christopher Waller, favoring a dovish stance. Waller stated that 3 or 4 rate cuts are possible in 2025 if data cooperates. The Atlanta Fed's GDPNow model estimates above-trend Q4 growth at 3.2% SAAR, up from 3.0% on January 17.

The Fed must follow its mandate to keep inflation low and stable, and central bankers are expected to prioritize this goal over pressure from the White House. The market will closely watch Powell's comments and the Fed's decision, which will be released on Wednesday.