The vast majority of Federal Reserve members agreed to keep policy rates unchanged in the 3.5%–3.75% range at the latest monetary policy meeting. As widely anticipated, the decision had little impact on financial markets.
By contrast, the White House is unlikely to welcome the Fed’s inaction. The Trump administration would prefer lower borrowing costs to support household spending and provide additional momentum to the economy ahead of the November 3 midterm elections.
It is therefore unsurprising that both Stephen Miran, the most recent Fed governor appointed by Donald Trump, and Christopher Waller, who is seen as a contender for the Fed chairmanship, voted in favour of another rate cut, aligning with the President’s preferences.
Investors shouldn’t expect aggressive rate cuts
At this stage, however, the US central bank remains well positioned to fulfil its mandate of price stability and labour market support. It expects only limited rate cuts in 2025 and beyond.
While the appointment of a new Chair could influence communication at the margin, monetary policy decisions remain collective.
Replacing Jerome Powell alone would not be sufficient to undermine the Fed’s independence, which should allow it to continue playing its role over the coming quarters.
Given this resilient economic backdrop, we maintain our exposure to the US market across all our diversified portfolios.
