The Federal Reserve is unlikely to cut interest rates this week despite growing concern about the state of the U.S. economy and the impact of President Trump’s trade agenda.
Markets are expecting the Fed to maintain its pause on cuts, a move that would deprive them of stimulus following two weeks of sizable losses and that could incur the wrath of Trump.
Interest rate futures contracts indicate a 99-percent probability that the Fed will hold interbank lending rates steady at a range of 4.25 to 4.5 percent, as measured by the CME FedWatch prediction algorithm.
“We expect the Fed to hold rates steady for the second consecutive meeting and, given heightened uncertainty, provide limited guidance about the policy path ahead,” analysts for Deutsche Bank wrote in a Friday note to investors.
The pause on rate cuts could prompt some Fed-bashing by President Trump, who has frequently broadcast his feelings about the Fed and its chair Jerome Powell despite the legal and institutional independence of the central bank.
After the Fed paused its rate cuts in January, Trump accused central bankers of failing “to stop the problem they created with inflation.” He also said he knew more about interest rates than chair Powell though he later conceded that the pause was the “right thing to do.”