Investment Bank: The Federal Reserve will cut interest rates by 25 basis points tonight, it will take some time to eliminate dovish tendencies

The Nordic United Bank analysis states that with Trump's victory in the U.S. election and the Republican Party likely to control both houses, the market should expect most of his campaign promises to be fulfilled. The Federal Reserve may automatically cut interest rates by 25 basis points tonight and in December because they believe current rates are restrictive. If the current strong economic development continues, coupled with the impact of Trump's victory, it should soon make the Fed less certain whether these preemptive rate cuts are necessary.

The impact of Trump's policies on inflation will take some time to reflect in CPI data, but we should start seeing effects on more hiring and lower immigration early next year. We're not sure when exactly the Fed will decide to stop cutting rates, but it is most likely that before dovish FOMC members are convinced, there will be another 25 basis point cut in March next year, although there is also a great possibility that no rate cuts will occur in 2025.