Former New York Fed President: Powell May Need to Respond Head-on to Trump Policy Implications Next Week

On 13 December, it was reported that former New York Fed President Dudley pointed out in an article that Fed Chairman Powell will have to respond positively to the impact of Trump's policy on monetary policy at next week's interest rate meeting. The Federal Reserve to consider policy changes need to meet four conditions: the possibility of policy change, significant impact on the economy, the policy content is clear, the financial markets have begun to expect. Based on this, the Fed may include the extension of the 2017 tax cuts in its forecast, but exclude the uncertain impact of tariffs and immigration policies for the time being.

The latest Summary of Economic Projections (SEP) is expected to show: a slightly stronger economic outlook for 2025-2026 than in September, reflecting continued economic momentum and higher productivity growth; rate cuts in 2025 may be narrowed to 50-75 bps (compared with the previous expectation of 100 bps); the neutral interest rate is likely to rise to 3 per cent or higher, but less than futures market expectations; and inflation is expected to fall back to the 2 per cent target in 2026. Target. Dudley emphasised that the economic outlook could turn pessimistic once Trump's tariffs and immigration policies come into focus.