The Federal Open Market Committee maintained its policy rate in the target range of 4.25-4.5% on Wednesday, a move predicted last year by Nigel Green, CEO of leading independent financial advisory deVere Group.
Yet, despite the Fed’s decision to hold rates steady, markets are facing uncertainty as President Donald Trump begins his second term, with expectations that he will advocate for lower interest rates.
“Trump’s return to the White House raises concerns over economic stability, with expectations that the administration will push for more accommodative monetary policy,” said Green.
“However, such moves could exacerbate inflationary pressures rather than provide sustainable economic growth. His administration is also weighing policies such as new potential tariffs and mass deportations — both of which have the potential to drive inflation higher and create broader economic disruption.”
He added that, “the Fed’s decision to hold rates was expected, but the real story here is the renewed tension between the White House and the central bank.”
“His administration has already signaled its preference for lower interest rates, but that does not mean the Fed will — or should — comply without considering the economic consequences.
“Policies such as tariffs and mass deportations could further complicate the inflation outlook and force the central bank into a defensive stance,” Green said, remaining cautious about the broader economic trajectory.
“The economic landscape is fraught with risk, and while fiscal stimulus may boost short-term growth, the long-term effects could be far more destabilizing.”
The deVere CEO warned investors to be aware that history has shown how excessive government intervention can be a masterclass in the law of unintended consequences, particularly when it involves trade restrictions and labour market disruptions.
Unconventional approach led to volatility
Trump’s unconventional approach to economic policy has previously led to volatility, and this trend looks set to continue. Investors are weighing potential fiscal stimulus measures against the risks of inflation and geopolitical instability.
With the battle lines drawn between the White House and the Federal Reserve, the deVere Group is advising clients to remain vigilant.
“Investors should be reassessing their portfolios with a focus on hedging against potential economic turbulence,” Nigel Green noted.
“The Fed may be hesitant now, but its independence remains crucial in preventing an overheating economy. Investors should recognise that markets thrive on stability, not unpredictability.”
“The coming months will test the resilience of the economy, and those who take a measured approach to risk management will be best prepared for what lies ahead,” he concluded.
