According to data from the CME FedWatch tool, there is an 89.9% probability of a 25 basis point rate cut on Wednesday.
- In the run-up to the FOMC’s December meeting, several economists and Trump administration officials, including President Donald Trump, have weighed in on what the central bank’s monetary policy decision should be.
- In an interview with Politico, President Trump said support for interest rate cuts would be a filter in nominating the successor to Fed Chair Jerome Powell.
- Last week, National Economic Council Director Kevin Hassett said that it is a “good time” for the Fed to cut rates cautiously.
The Federal Reserve is all set to announce its interest rate decision on Wednesday. While investors expect a 25-basis-point rate cut, the markets will keep an eye on the Federal Open Market Committee (FOMC) and on Fed Chair Jerome Powell’s commentary.
In the run-up to the FOMC’s December meeting, several economists and Trump administration officials, including the U.S. President himself, have weighed in on what the central bank’s monetary policy decision should be.
With D-Day finally here, here’s a recap of what President Trump and others have said so far:
Mohamed El-Erian
Mohamed El-Erian, Chief Economic Advisor at Allianz, noted that the recent volatility in the Fed rate cut expectations is a result of multiple factors, including a “lame duck Chair.”
In an opinion piece for The Financial Times on Tuesday, El-Erian added that the long-term impact of the choice for the next Fed Chair would be “far more consequential” than the immediate impact on markets.
“Crucially, the new Chair will set the tone for much-needed reforms to strengthen the Fed's effectiveness. This is key to maintaining its political autonomy and maximizing its contributions to long-term economic well-being,” he said in a post on X.
President Donald Trump’s Remarks
In an interview with Politico, President Trump said support for interest rate cuts would be a filter in nominating the successor to Fed Chair Jerome Powell.
According to the report, President Trump said that support for immediately slashing rates would be a litmus test for his choice of the Fed Chair nominee.
He also continued with his attacks against Powell, calling him “not a smart person.” The President has called him “Too Late” in the past, while asking him to slash interest rates.
Kevin Hassett’s Take
Last week, the National Economic Council Director Kevin Hassett said that it is a “good time” for the Fed to cut rates cautiously. On Tuesday, he signaled his openness to deeper rate cuts if the economic data supported it.
The NEC Director is currently among the frontrunners to succeed Fed Chair Jerome Powell, whose term expires in May next year.
NY Fed’s John Williams
John Williams, President of the Federal Reserve Bank of New York, stated last month that while it is important to bring inflation back to the Fed’s long-term goal of 2%, it is necessary to do so without creating undue risks to the goal of maximum employment.
He stated that the Federal Reserve's current monetary policy is “modestly restrictive” and that he sees some room for further adjustment following the 25 bps rate cuts in September and October.
Williams also noted that some of the current inflation could be attributed to President Trump’s tariffs.
Jeremy Siegel
Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School of Business, on Tuesday, noted that while he expects the Fed to cut rates by 25 bps, it could be a hawkish easing.
“The statement will likely emphasize a willingness to pause in January if the labor data remain firm, and we could see three or four dissents,” he said, explaining why he thinks it would be a hawkish decision.
Regarding the dissents, Siegel expects Fed Governor Stephen Miran to continue to push for a 50 bps cut, while there could be two to three hawks calling for no cut at all.
According to data from the CME FedWatch tool, there is an 89.9% probability of a 25 bps rate cut on Wednesday.
Meanwhile, U.S. equities declined in Wednesday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down by 0.06%, the Invesco QQQ Trust ETF (QQQ) declined 0.11%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) fell 0.05%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘neutral’ territory.
The iShares 7-10 Year Treasury Bond ETF (IEF) was down by 0.14% at the time of writing.
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