Fed expected to cut interest rates at last meeting before Trump takes office

Policymakers and investors will closely watch an announcement from the Federal Reserve on Wednesday setting the level of its benchmark interest rate, which helps determine loan payments for everything from credit cards to mortgages.

The impending move marks the final interest rate decision before the inauguration of President-elect Donald Trump, who repeatedly criticized Fed Chair Jerome Powell during Trump's first term in office.

Investors consider a quarter of a percentage point rate cut all but certain on Wednesday, according to the CME FedWatch Tool, a measure of market sentiment.

A rate cut of that size would match the move taken by the Fed last month, and it would amount to a percentage point worth of cuts made in a matter of months since the central bank opted to start dialing back its fight against inflation in the fall.

The widely expected rate cut on Wednesday may prove the Fed's last for many months, however, experts previously told ABC News.

A recent bout of stubborn inflation could prompt central bankers to freeze interest rates in place as they bring price increases under control. A humming economy, meanwhile, shows little need for the jolt of activity that lower borrowing costs may provide, the experts said.

Consumer prices climbed 2.7% in November compared to a year ago, marking two consecutive months of accelerating inflation, government data last week showed.

Inflation has slowed dramatically from a peak of more than 9% in June 2022. But the recent uptick has reversed some progress made at the start of this year that had landed price increases right near the Fed's target of 2%.

In August, Trump said the president should have a role in setting interest rates. The proposal would mark a major shift from the longstanding norm of political independence at the Fed.

Powell struck a defiant tone last month when posed with the question of whether he would resign from his position if asked by Trump.

"No," Powell told reporters assembled at a press conference in Washington, D.C., blocks away from the White House.

When asked whether Trump could fire or demote him, Powell retorted: "Not permitted under the law."