Policy and policy uncertainty

30 Jan 2025 2 min read

Daily update

The Federal Reserve did nothing on rates, which seemingly displeased US President Trump. Uncertainty about the inflationary impact Trump鈥檚 policies might reduce the chance of a March rate cut, but characterizing policy as restrictive does suggest future rate cuts are plausible. Overt criticism of the Fed by Trump risks tilting the Fed toward hawkishness in any close call decision, to prove their independence.
The Trump administration seemingly retreated from its freeze on federal grants and loans, though legal challenges to the original order may continue. Near-term disruption should be minimized. The economic question is whether people whose incomes depend on such transfers become more uncertain about the future (risking an increase in savings).
The ECB meets and 63 out of 63 surveyed economists think there will be a 25bp rate cut. The idea that so many economists are wrong is, obviously, outside the limits of human comprehension. The ECB is likely to lower real interest rates this year.
Spanish January preliminary consumer price data is not expected to show much movement. UK December consumer credit and mortgage lending data is due鈥攃onsumers have been spending, but are presumed to be using rising real incomes to finance that. US 4Q GDP is due for another revision.