Federal Reserve remains undeterred in its rate decision-making.

Fed Stands Firm: US Interest Rates Unchanged Amid Trade War Uncertainties

Federal Reserve remains undeterred in its rate decision-making.

The Federal Reserve decided to keep the benchmark interest rate within the 4.25% to 4.5% range, causing ripples among financial experts. The decision comes amid mounting concerns over the economic impact of President Trump's trade policies.

Fed Chair Jerome Powell and his team left the monetary policy rate unchanged, following expectations from financial analysts. Yet, Trump had persistently urged the Fed to lower interest rates in recent weeks. The central bank justified its decision by highlighting the increased risk of higher inflation - possibly linked to Trump's aggressive trade maneuvers.

Trump has publicly criticized Fed Chair Jerome Powell. Recently, he remarked, "I reckon I've got a feel for interest rates better than he does." It is worth noting that the Fed operates independently of the US government. The central bank shows no immediate signs of giving in to Trump's demands for rate cuts, setting it on a collision course with the president.

However, any consideration of rate cuts depends on a clearer understanding of how Trump's trade war is affecting the United States' economy and prices. The guardians of the currency have voiced concerns over the increased uncertainty surrounding the economic outlook.

To the surprise of many, the US economy reported a mild contraction at the start of the year - after a prolonged period of growth. Gross domestic product (GDP) fell by 0.3 percent compared to the previous quarter and on an annualized basis. Still, some experts argue against an early rate cut, citing the surprisingly resilient job market.

Subtle Adjustments Expected This Year

The Fed's mission is to keep inflation in check, aiming for an inflation rate of 2 percent. In March, US consumer prices rose by 2.4 percent year-on-year, down from 2.8 percent in February. Sustaining this trend remains uncertain, given that March was before Trump's comprehensive trade package imposing tariffs on goods from around the world.

High interest rates can control quickly rising consumer prices by diminishing demand and discouraging companies from hiking prices excessively. At the same time, higher rates can slow down the economy by discouraging spending and investment, leading to lower consumer confidence.

The Fed initiated a significant rate hike in September 2022, cutting rates by 0.5 percentage points in response to a big inflation wave. In the following months of November and December, two smaller steps of 0.25 points each followed. Since then, the central bank of the world's largest economy has not altered the key rate despite persistent inflation. Economists project an average key rate of 3.9 percent by 2025, indicating two small rate adjustments this year.

Americans on Edge due to Trump's Tariffs

Trump's trade policies, criticized as volatile by opponents, have caused turbulence in financial markets - fueled by his repeated barbs against Fed Chair Jerome Powell. Nevertheless, Trump recently clarified that he would not remove the still-serving Fed chief until May 2026.

Economy "Trump Backs Off Firing Fed Chief" On April 2, Trump imposed a 10 percent tariff on imports from most countries, along with higher tariffs for many trading partners, which were then suspended for 90 days. He also imposed 25 percent tariffs on cars, steel, and aluminum, 25 percent tariffs on Canada and Mexico, and 145 percent tariffs on China. Trump's administration is reportedly negotiating with over 15 countries to reach trade agreements that could potentially avert the higher tariffs.

Trump has made tariffs a cornerstone of his economic agenda, promising that they will enrich America in the long run and rejuvenate manufacturing jobs. However, businesses and individuals express concern about the economy due to the persistent uncertainties surrounding tariffs and the resulting fear of higher prices.

Source: ntv.de, mpa/dpa/rts/DJ

• USA
• Jerome Powell
• Donald Trump
• Fed
• Interest rate
• Monetary policy
• Tariffs
• Trade conflicts
• Trade relations

1. The Federal Reserve's employment policy continues to emphasize maintaining an average inflation rate of 2%, despite the implementation of Donald Trump's trade policies.
2. Financial analysts had anticipated no changes in the Federal Reserve's employment policy regarding interest rates, given the uncertainties surrounding the economic impact of the ongoing trade wars.
3. In the face of Trump's persistent calls to lower interest rates, the Fed's employment policy remains firm, citing the risk of higher inflation due to aggressive trade maneuvers as justification.
4. The US economy, buoyed by a surprisingly resilient job market, has shown signs of economic contraction, sparking debate among experts about the timing of rate cuts in the Fed's employment policy.
5. Economists project that by 2025, the average key rate under the Fed's employment policy will be 3.9%, hinting at subtle adjustments in the near future.

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