The US Federal Reserve took a cautious but decisive move this week, cutting its target interest rate by 25 basis points to a range of 4.50-4.75 percent, signaling a continuing but measured cycle of policy easing.

That marked another step toward supporting the economy as inflation nears the Fed’s 2 percent target. But economists warn that there is an air of uncertainty surrounding future rate cuts with the recent election of President-elect Donald Trump, whose policies could change the economic landscape.

Commenting on the Fed’s decision, CBA Chief Economist Stephen Halmarik said the big four banks shared the widely held view that the policy agenda of the incoming President Trump administration, including tax and tariff cuts, posed risks to the outlook for inflation in the US.

“As a result, we have adjusted higher by 50 basis points the expected low point in this Fed easing cycle from 3-3.25% to 3.5 to 3.75%,” Halmarik said.

“We continue to expect a 25 basis point rate cut at the December 2024 FOMC meeting.” and further moves of 25 basis points in early 2025, but an end to policy easing around mid-2025.”

During the post-meeting press conference, Fed Chairman Jerome Powell said that he and the Federal Open Market Committee (FOMC) would not pre-assess the economic/inflationary impact of Trump’s policy agenda, but would assess the data as it came in — remembering , that President-elect Trump will not be sworn in until January 20, 2025.

What’s more, when asked if he would consider stepping down if pressured by Trump, Powell was firm, saying he had “no intention of resigning,” sending a clear message about the Fed’s autonomy.

Reflecting on Trump’s intention to reform the Fed by changing its dual mandate and influencing interest rate-setting, Halmarik noted that despite Republican control of Congress, passing such changes “would be difficult.”

“Therefore, President Trump’s ability to ‘take over’ the Fed and reduce its independence is limited in the short term.” But as with everything during the Trump presidency, this is unlikely to stop him from making his own thoughts about the level and outlook for interest rates well known, which, as noted, could increase volatility and uncertainty in financial markets,” said Halmarik.

Likewise, Seema Shah, chief global strategist at Principal Asset Management, noted that Trump’s potential policy changes bring considerable uncertainty, particularly around trade and fiscal policy.

With improved economic data and hotter-than-expected inflation readings, she noted that there is now less certainty around the Fed’s path for future cuts.

Markets that were previously certain of another rate cut next month now see a roughly 60 percent chance of that outcome.

“After December, the rate is very uncertain,” Shah said.

“In addition to considerations around the neutral interest rate, the Fed may need to consider inflation and the impact on growth of policy proposals. As it stands, however, investors and the Fed still lack clarity on the timing and scale of policy proposals, suggesting a prolonged period of uncertainty surrounding the Fed’s future rate path.