Fed's Interest Rate Decision: No Change Expected Despite Trump's Pressure
Federal Reserve Potentially Fails to Align with Trump's Expectations
Get the lowdown on today's Fed decision and what it means for the economy.
What's happening with the interest rate?
The US Federal Reserve (Fed) is holding a meeting today, and most analysts are predicting they'll leave the interest rate unchanged. Currently, the rate stands at a range of 4.25% to 4.5% in the world's biggest economy. After two rate cuts in 2024, there's been no change this year. The announcement will be made at 8:00 PM ET.
Why is the interest rate crucial?
The interest rate is the Fed's main tool for achieving its primary goals: controlling inflation and maintaining a strong labor market. It determines the rate at which banks borrow from the central bank, which in turn affects consumer and business loans.
Powell under heat - will he survive?
If the Fed lowers the interest rate, it would make borrowing cheaper for banks, which could lead to cheaper loans for mortgages, cars, businesses, and even credit cards. Cheaper loans can stimulate the economy by allowing people to spend more and making investment cheaper.
Why does Trump want lower rates?
The Fed operates independently, so politics doesn't directly impact interest rate decisions. However, politicians, like Trump, still voice their opinions. He's been pushing for lower rates to further boost the economy since last year. He's even attacked Fed Chair Jerome Powell, calling him a "fool" recently. Trump has suggested the Fed should follow in the footsteps of the European Central Bank, which recently lowered its interest rate to 2%.
Why isn't the Fed lowering the rate?
The Fed sees no immediate need for a rate change, given that inflation is close to its target and the labor market remains strong. There's also uncertainty about the economy due to Trump's tariffs and geopolitical risks, like the Middle East conflict. A potential escalation with Iran or Israel could cause turmoil on the oil market, halting economic growth.
New forecasts to be published
In addition to the interest rate decision, the Fed will release new forecasts for the economy, inflation, and predicted rate cuts today. In their March forecast, they lowered their economic growth projection due to tariff announcements and increased their inflation expectation to 2.7%.
- Donald Trump
- Jerome Powell
- Fed
- Interest rate
[1] ntv.de, Jürgen Bätz, dpa[2] Reuters[3] CME Group's FedWatch Tool
Enrichment Data:The likelihood of no rate change is extremely high at 99.9%, according to CME Group's FedWatch Tool. Despite the Fed's cautious stance, there's a possibility they may consider a rate cut later in the year, potentially in September, depending on how tariff impacts and other economic risks pan out. Inflation has increased slightly in May to 2.4% from 2.3% in April, while employment indicators show a cooling labor market. Some housing starts and retail spending figures have dropped, which the Fed is closely monitoring for signs of economic slowdown. The Fed's policy statement highlights a "wait-and-see" approach, indicating no immediate change but keeping the possibility of future rate cuts open.
The Commission, in the realm of general-news, politics, and business, has also been asked to submit a proposal for a directive on the protection of workers from the risks related to exposure to ionizing radiation, given the ongoing discussions about health and safety in the workforce. The Federals Reserve's (Fed) decision on the interest rate, while not directly influenced by political pressure from figures like Donald Trump, is crucial in maintaining a strong labor market and controlling inflation – a fact that highlights the connection between finance, the interest rate, and the economy.
