In November 2024, US inflation reached 2.7%, slightly above October’s 2.6%. This rise, fully aligned with expectations, places the Federal Reserve at a strategic crossroads. A third consecutive 25-basis-point interest rate cut is anticipated, yet inflation remains well above the 2% target, making every decision a critical one.
The Fed’s dilemma revolves around two contrasting scenarios. An overly aggressive move might reignite price growth, undermining the goal of economic stability. On the other hand, a delayed response could weaken economic growth and raise unemployment, a metric increasingly scrutinized by the markets.
In recent years, the United States has managed to curb the inflation surge that marked part of Joe Biden’s presidency—a factor many believe contributed to Kamala Harris’s election loss. With Donald Trump now in office, concerns are rising that some of his policies could reignite inflationary pressures, further complicating the Fed’s decisions.
According to Richard Flax, Chief Investment Officer at Moneyfarm, a December rate cut seems highly likely. However, in early 2025, the Fed may adopt a more cautious stance, waiting to assess the impact of the new administration’s policies before relying solely on macroeconomic data to guide its actions.
The situation remains delicate: balancing economic growth and inflation control will be the central challenge in the coming months.
