After two years of smooth sailing, Fed ready to navigate rocky bond market, Trump uncertainty
After two years of progress on inflation and surprisingly persistent economic growth, the Federal Reserve next week meets with one eye on new Trump administration policies and another on a bond market that has ratcheted up borrowing costs even as U.S. central bankers have been cutting interest rates. Both pose potential challenges in an economy where inflation has edged slowly closer to the Fed's 2% target without the recession and large rise in unemployment that some central bank officials felt would be needed for price pressures to ebb. The unemployment rate instead fell as low as 3.4% and ended 2024 at 4.1%, close to what many economists think the economy can support without reigniting price pressures; inflation has declined to perhaps just half a percentage point from the Fed's target.