Fed's hold on interest rates: anticipation of new decisions by Trump's team amid growing fragmentation of the global economy

On January 29, 2025, the US Federal Reserve left the current US discount rate at 4.25%-4.50%. The Fed's decision to keep the rate steady demonstrates the caution of its chairman, Jerome Powell, in the face of new economic challenges posed by Donald Trump's policies.

The Fed's decision to delay rate cuts reflects uncertainty about the long-term impact of Trump's administrative initiatives — import duties, immigration restrictions, tax reforms, and deregulation — on inflation, employment, and overall economic activity.

The Trump administration focuses on stimulating domestic production and forcing capital into the United States through an aggressive tariff policy.

Still, such actions may cause a short-term increase in inflation. This limits the Fed's room for maneuver in monetary policy and raises concerns about a rapid rate cut.