Trump’s policy moves still biggest risk amid DeepSeek-induced sell-off last week

The first Federal Open Market Committee (FOMC) meeting of 2025 may have seemed irrelevant to many investors against the global market turmoil last week, triggered by news that China’s DeepSeek had managed to develop a high-performing artificial intelligence (AI) model very cheaply and without using the most advanced chips.

With US inflation still slightly elevated and economic activity expanding at a healthy pace, the FOMC decided to do what almost everyone expected: it held the target range for the federal funds rate unchanged at between 4.25 and 4.5 per cent.

Yet, many of the questions Fed chairman Jerome Powell fielded during the post-FOMC meeting press conference were a reminder that the really big risk in the months ahead is the potential disarray US President Donald Trump may bring to the US economy and the functioning of the country’s public sector institutions.

Indeed, the very first question posed to Powell during the press conference related to Trump’s pledge during a speech on Jan 23 via video at the World Economic Forum in Davos, Switzerland was if he will demand that interest rates drop immediately in the US and around the world.

“Has the president done this to you? Has he made that demand?” Powell was asked. “What effect, if any, does the president making these kinds of remarks have on policy?”