Federal Reserve officials are signaling a pause in rate adjustments, with Deutsche Bank analysts projecting a wait-and-see approach due to rising uncertainties stemming from President Trump’s tariff policies.

Predictions Pointing to Rate Cuts Delayed Until Late 2025

Deutsche Bank forecasts that the Fed will not reignite rate cuts until December 2025, with additional cuts likely in early 2026. This strategy aims to align borrowing costs to a neutral level of 3.625%, intended to neither stimulate nor hinder economic activity.

• The current Fed rates range from 4.25% to 4.5%.

• CME’s FedWatch Tool estimates a 54.7% probability of a September rate cut.

Inflation and Tariff Dynamics Under Scrutiny

Trump’s strict tariff agenda complicates the inflation outlook, with economists warning that increased duties on imports may escalate consumer prices and hamper economic growth, further restricting the Fed’s capacity to respond decisively.

Nonetheless, strong employment data from May highlights the resilience of the U.S. economy, which tempers the urgency for immediate rate reductions. Policymakers aim to await additional clarity from forthcoming inflation reports before making shifts.

Key Indicators to Watch

Financial markets will be keenly observing inflation indicators this week for signs of continued pricing pressure or easing. Until then, the Fed is likely to maintain its policy of patience.

Monitoring Inflation and Federal Reserve Expectations

• Economics Calendar for timely updates on inflation and job reports.

• Commodities Data to observe reactions in global prices relative to U.S. policy shifts.