Lawrence Summers, who served as Treasury Secretary under Bill Clinton, believes that Trump's public statement of "hoping to see a significant decrease in interest rates" is a government intervention that "can easily backfire, and the Fed will not heed his advice." Summers also stated that unless there is a financial market collapse, it will be difficult for the Fed to cut interest rates as expected. The Fed itself is eager to downplay its tense relationship with the White House. Powell is expected to avoid political issues and refrain from mentioning Trump's name in the post-meeting press conference. (Jinshi)

Goldman Sachs expects that tomorrow's January interest rate decision of the Federal Reserve will not provide any new information. The FOMC may acknowledge signs of stabilization in the labor market in its statement, but is unlikely to provide forward-looking guidance for policy action in March. Tariffs are expected to lead to a moderate, one-time increase in inflation, which the Fed may overlook. Historically, Fed officials have downplayed the inflationary impact of tariffs and followed potential GDP effects more closely. Goldman Sachs expects two 25-point basis rate cuts in 2025, one in June and the other in December, with another rate cut in 2026.

CoinDesk reported that Societe Generale expects the European Central Bank to cut its key interest rates by 25 basis points at its next meeting, bringing the deposit interest rate to 2.75%. The market widely expects the bank to cut rates again in March, when new data and forecasts will help shape discussions about the neutral level. This has not stopped several committee members from expressing a preference for further cuts to 2% at subsequent meetings, but this may be a precautionary guidance before potentially disruptive US trade policies. It is also possible, especially if data continues to show resilience as expected, that the European Central Bank feels the need to switch to quarterly interest rate decisions after March. This will help it better understand how the economy is evolving and where the neutral level might be. Currently, Societe Generale expects the European Central Bank to cut rates again in April, with a terminal interest rate of 2.25%.