Fed Holds Steady Amid Trump's Immigration, Trade Moves

The Federal Reserve has indicated that it will maintain its current interest rate policy, with no immediate plans to cut rates. This decision comes despite calls from President Trump for a rate cut. The Fed has stated that it will continue to monitor economic data and adjust its policy accordingly. However, traders expect the Fed to taper policy accommodation this year.

The Fed's decision to keep rates unchanged has sparked renewed concerns about inflation. Some analysts believe that the Fed's hawkish stance may lead to a delay in expected rate cuts, potentially igniting fresh inflation worries. Traders, based on short-term interest rate futures, anticipate that the Fed may postpone a rate cut until June.

In response to the Fed's decision, the crypto market has remained relatively stable. The crypto market had already anticipated the decision to keep interest rates unchanged. Fed Chair Jerome Powell had previously indicated that the committee would proceed cautiously with any rate cuts. The crypto market's attention will now shift to the next FOMC meeting and Powell's comments on future rate cuts.

President Trump has announced plans to deport a significant number of illegal immigrants and impose tariffs on goods from Mexico and Canada. These actions could potentially strengthen the labor market and lead to higher inflation. However, economists generally agree that these actions are more likely to increase inflation rather than help to reduce it.

The Fed's decision to keep interest rates steady aligns with market expectations. The Federal Reserve was expected to keep interest rates unchanged in the January meeting. While President Trump has pushed for an immediate rate cut, the Fed may hold off due to inflation concerns. Powell's press conference will provide more clarity on future rate moves.

CME FedWatch data showed a 99.5% probability of the Federal Reserve keeping rates unchanged at the current rate of 4.25% to 4.5%. The Fed started lowering interest rates in late 2024, cutting by 50 basis points in September and again in November and December. More cuts of up to 50 basis points are possible, but will depend on economic slowdown and lower inflation.

Trump's tax policies may boost the economy, but his trade tariffs and immigration restrictions could raise inflation and delay further rate cuts. With inflation still high and the economy doing well, the need for significant cuts is less urgent. Future Fed decisions may also hinge on the labor market and upcoming non-farm payroll data.