Fed heads into December meeting with new president-elect, same economic concerns 

Inflation is higher than it was in 2016, and the Fed is just at the beginning of its rate-cutting cycle

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President Donald Trump | lev radin/Shutterstock modified by Blockworks

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You may be experiencing some déjà vu. But for the Fed, 2024 is very different from 2016. 

While our president-elect and his ambitious economic plans (tax cuts, tariffs, stricter immigration policies) are the same today as they were eight years ago, the economy is in a vastly different place. Last week’s election results may have come too late for committee members to consider them in their interest rate decision, but there is still one more meeting before the end of the year. 

Back in December 2016 (roughly six weeks after Donald Trump was elected for his first term), the FOMC, as expected, raised interest rates for the first time in a year. What came as more of a surprise was that committee members — including current Fed Chair Jerome Powell — went on to increase the pace of rate hikes for the following year. 

“Many participants noted that the effects on the economy of such policy changes, if implemented, would likely be partially offset by tighter financial conditions, including higher longer-term interest rates and a strengthening of the dollar,” according to minutes from the FOMC’s December 2016 meeting.

Inflation is higher than it was in 2016, and the Fed is just at the beginning of its rate-cutting cycle. The labor market is in a precarious position, one that could be disrupted by Trump’s mass deportation plans. Prices on goods and services are easing, but higher tariffs pose a threat. 

We’ll get some Fed speak this week that could shed some light on the central bank’s plans. The next policy-setting meeting is slated for Dec. 17-18.


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