Karen Ward, Chief Market Strategist for Europe, Middle East, and Africa at JPMorgan Asset Management, suggests that the Federal Reserve may halt its rate-cutting actions after December to assess the economic impact of policies under President-elect Donald Trump. Ward indicates that while Fed Chair Jerome Powell is uncertain about the 2025 outlook, it is yet to be seen whether Trump's policies will spur growth or inflation. She anticipates one more rate cut from the Fed, with the likelihood of pausing in 2025.
Powell recently tempered expectations for further rate cuts, citing the robust performance of the U.S. economy. He stated that there is no urgency to reduce rates, focusing on ensuring inflation metrics remain within acceptable bounds.
Ward's perspective diverges from the mainstream expectation on Wall Street, where many economists foresee continued rate cuts next year. Strategists from TD Securities, including Oscar Munoz and Gennadiy Goldberg, share Ward's outlook, predicting a pause in rate cuts during the first half of 2025 as the Fed evaluates Trump's policy impacts.
The Fed recently cut rates significantly, first by 50 basis points in September, followed by a 25 basis point reduction last week. Market predictions indicate a 58% probability of another 25 basis point cut next month, according to CME FedWatch Tool.
David Kelly, JPMorgan's Chief Global Market Strategist, warned of the potential for Trump's aggressive tariff plans to slow the global economy and exert upward pressure on U.S. inflation. This scenario could lead to conflict between the Fed and the Trump administration, given the potential misalignment of Trump's policies with monetary policy direction.
Ward also believes that the prospect of U.S. fiscal expansion and higher inflation could bolster the performance of Nordic government bonds.
