Federal Reserve disregards Trump's wishes - no change in interest rate policy
Get ready for some straight talk! Here's the down-low on the recent Federal Reserve decision that's sure to light up the economic world.
Why the Rate Remains Unchanged
In the face of increasing demands from the White House for lower interest rates, the Federal Reserve has opted to keep the key interest rate within the range of 4.25 to 4.50 percent. Many experienced economists, including Alexander Krüger, Chief Economist at Hauck Aufhäuser Lampe Privatbank, believe this move shows the Fed's determination to stick to its guns and await further data, dismissing political pressure.
The Future of Interest Rates
Despite growing criticism from President Trump, the Federal Reserve plans for cuts in the coming years, with a total of around half a percentage point estimated by 2025. However, these predictions are not unanimous, as some officials within the Fed don’t foresee any cuts in 2025 at all.
Revised Growth and Inflation Forecasts
With continued economic uncertainty looming, the Federal Reserve has downgraded its growth expectations for the US economy, now expecting a 1.4 percent increase this year. The prediction for the unemployment rate is a slightly higher 4.5 percent. Inflation also takes center stage, with a projected 3.0 percent rate by the end of 2025 – a slight increase compared to earlier forecasts.
The Walking Tightrope
Lena Drews, Research Director at the Kiel Institute for the World Economy (IfW) remarks, "The Federal Reserve is at the center of a delicate balancing act." The central bank must maintain its credibility while steering clear of political influence.
Trade Policy and Its Impact on Inflation
Trade policies continue to impact inflation, with consumer prices showing a year-on-year rise of 2.4 percent in May. However, some economists suggest the true effects of the tariffs will be felt later.
A Final Word
Elmar Voelker, an economist at LBBW, concludes that the Fed still plans to eventually cut rates as the current monetary policy is seen as hindering US economic growth. This subtle but watchful approach demonstrates the Fine Line the Federal Reserve dances, balancing economic growth support with inflation risk control in these tumultuous times.
Sources:- ntv.de- jwu/rts- [1] Fed official projections- [2] Summary of Economic Projections (SEP)- [3] Dual Mandate- [4] Monetary policy normalization- [5] Uncertainties and policy adjustments
Keywords:- Fed- Monetary policy- Inflation- Growth forecast- Donald Trump
- The Federal Reserve's monetary policy, unchanged despite pressure from the White House, is a significant topic in the realm of business, finance, and general-news, showcasing the delicate balance the Fed must maintain between economic growth and inflation risk control.
- Amidst increasing demands for lower interest rates from the White House, the Federal Reserve's employment policy, as seen in its decision to hold rates steady, is a clear indication of its commitment to data-driven decisions and resisting political pressure, a matter of great importance in politics and economics.
