- The Fed lowered rates by 25 basis points
- However, Trump’s economic plan could increase volatility in the bond market
- This may limit the Fed’s ability to make significant further rate cuts
The Fed reduced rates by 25 basis points, but there are some concerns about further cuts due to Trump’s economic plan.
Some analysts believe this could create volatility in the bond market, which has risen by more than 70 basis points since September and is currently valued at $28 trillion.
If the bond market faces the predicted rebound, lowering interest rates could become challenging, though the Fed has not made definitive comments on how the new administration might influence its plans.
More on the Rate Cuts and Future Outlook
The U.S. bond market is now valued at $28 trillion, with the yield on 10-year Treasuries increasing by more than 70 basis points since September, marking its largest monthly rise since the 2008 crisis.
Trump’s economic agenda, including tax cuts, may stimulate growth, but fiscal expansion and tax incentives could drive consumer prices higher, potentially adding volatility to the recovering bond market.
This could complicate the Fed’s rate-cutting cycle, which began with a 50-basis-point cut and now stands at 25 basis points, according to some analysts. However, Fed Chairman Jerome Powell said yesterday:
“In the near term, the election will have no effects on our policy decisions. We don’t guess, we don’t speculate, and we don’t assume.”
He also commented on Trump’s plans to replace leadership in certain financial institutions, saying he would not resign if asked to leave early by the President-elect, adding that dismissing any of the Fed’s seven governors is “not permitted under the law.”
Conclusion
The rate cut has already impacted the cryptocurrency market, and it is crucial to stay vigilant.
As for Donald Trump, it is worth noting that he has not yet taken office, but the effects of his election are already spreading through financial markets. We are likely to witness many significant events and decisions in the near future, so stay tuned.
