**********The Federal Reserve has postponed its decision to cut interest rates, causing market uncertainty due to rising inflation expectations
After US President Trump announced the imposition of import tariffs on steel and aluminum, global economic uncertainty has intensified, and market expectations for future inflation have also risen. Although the market generally expected the Federal Reserve to cut interest rates again in March, according to the latest survey results, the Fed will consider cutting interest rates again in the next quarter. The rising inflationary pressure and the spread of trade concerns have become key factors affecting the decisions of the Federal Reserve.
Trump's tariff policies exacerbate inflation concerns
Trump's trade policies, especially the imposition of steel and aluminum tariffs, have raised concerns in the market about future inflation. With the increase in tariffs, economists generally believe that this will bring additional price pressure to the US economy. These tariffs have inflationary effects and may have a negative impact on economic growth. This uncertainty means that the Federal Reserve will remain on the sidelines until it has a clearer understanding of the actual situation, "said James Knightley, chief international economist at ING.
The Federal Reserve is not in a hurry to cut interest rates and maintains a wait-and-see attitude
Although the Federal Reserve has already cut interest rates by 100 basis points between September and December last year, officials including Federal Reserve Chairman Powell have recently stated that the Fed is "not in a hurry" to further cut interest rates. Many economists believe that a strong job market and stable consumer spending have put the US economy in a good state, so there is no need to rush for further interest rate cuts. Our current economic situation does not require further interest rate cuts, especially against the backdrop of gradually rising inflationary pressures, "said the consensus within the Federal Reserve.
Economists disagree on the timing of interest rate cuts
Although nearly 60% of economists in a January survey expected the Federal Reserve to cut interest rates in March, in the latest survey in February, economists had divergent views on the timing of the rate cut. Most economists predict that the Federal Reserve will cut interest rates before the second quarter of this year, but there are also some who believe that the rate cut will be postponed until the second half of the year. The complexity and uncertainty of Trump's policies have led to lower confidence in our predictions, "said ANZ analysts.
Inflation expectations rise, with gold and other assets receiving attention
As inflation expectations rise, investors are starting to pay attention to the direction of the Federal Reserve's monetary policy. According to the latest survey results, over 90% of economists have raised their annual forecast for US inflation in 2025, and the increasing inflationary pressure may restrain further easing policies by the Federal Reserve. If tariff policies ultimately lead to an increase in inflation, the Federal Reserve may have to pause interest rate cuts or even maintain existing policies, "said Neil Schelling, Chief Economist at Capital Economics.
Editor's viewpoint:
The increase in inflation expectations caused by the imposition of tariffs by the United States has slowed down the pace of interest rate cuts by the Federal Reserve. Despite facing certain economic growth and inflation pressures, the Federal Reserve tends to maintain a wait-and-see attitude due to market uncertainty, especially in the context of continued trade concerns. In the coming months, how the Federal Reserve responds to these challenges will have a significant impact on the US dollar and the global economy, and investors need to closely monitor the long-term effects of policy changes on financial markets.
