Fed's future path

Mr Trump's victory has increased uncertainty

Donald Trump's decisive victory in the US presidential election has increased uncertainty regarding the direction the Federal Reserve would take, with implications for the global economy. As expected, the Federal Open Market Committee (FOMC) of the Fed decided to reduce the federal funds rate by 25 basis points last week. The US central bank started reducing rates in September with a 50 basis point cut. It had raised the policy interest rate to the highest level in decades in response to near double-digit inflation rates in 2022. Although the inflation rate moderated significantly in recent months, it remains above the medium-term target of 2 per cent. Nonetheless, the Fed started reducing the policy interest rate with the expectation that the inflation rate would soon align with the target.