Peconomic Uncertainty Keeps Fed's Key Rate Unchanged, Trump's Pleas Ignored
Federal Reserve remains unwavering on interest rate decisions
The US central bank, the Federal Reserve, stood firm against President Trump's demands for lower interest rates, deciding to leave the key rate unchanged. Jerome Powell and his team declared an increased risk of higher inflation due to Trump's trade policies and they're in no rush tolower interest rates.
Donald's rantings about Jerome's understanding of interest rates have been less frequent of late. However, Powell and Trump continue to be at loggerheads, with the Fed keeping the key rate in the range of 4.25 - 4.50 percent, as Trump had previously wished for a cut.
Trump's trade policy has been a hot topic, with critics pointing out its potential repercussions on the economy. The Fed is carefully monitoring the effects of the trade conflict ignited by Trump's tariffs on various factors, including prices and the overall economy. The central bank is cautious about easing monetary policy too soon, citing increased economic uncertainty as a primary reason.
In contrast to Trump's protectionist policies, the robust US labor market hints at a continued expansion. Yet, GDP surprisingly shrank in the first quarter of Trump's tenure. As a result, the Fed is taking a wait-and-see approach to gauge the full impact of the economy before making any adjustments.
Sources point to the mixed economic signals as a concern for the Fed, suggesting they need to take a more cautious stance when considering rate changes. Additionally, the Fed is wary of the impact of tariffs on inflation, which could prompt a spike in consumer prices if left unchecked.
Uncertainty surrounding Trump's trade policies has been steadily escalating and early indications show a slowdown in the economy. Given this background, the Fed is planning small interest rate steps this year, with an average key interest rate of 3.9 percent by 2025 suggested.
This deterrent against rapidly rising consumer prices by maintaining higher rates is a double-edged sword. It may slow down the economy, but it's meant to discourage companies from increasing their prices. As the tariff war wages on, Americans are feeling the pinch, with many expressing concerns over how their lives will be affected.
Trump's Tariffs - Love 'em or Loathe 'em?
Trump's tariffs have ignited a flurry of reactions, with some applauding the move and others condemning it outright. In April, Trump announced tariffs of 10 percent on imports from most countries, with higher tariffs for many trading partners initially docketed for suspension but eventually delayed for 90 days. He also implemented 25 percent tariffs on cars, steel, and aluminum, along with 25 percent tariffs on Canada and Mexico, and 145 percent tariffs on China.
The US administration is engaging in talks with 15 countries to reach trade agreements that could potentially avert the higher tariffs. Trump has long touted his tariff policies as key to a better economy and job growth. However, critics question whether this approach will truly deliver the long-term benefits Trump is promising.
In recent months, tariffs have shaken financial markets, causing turmoil in the wake of ongoing attacks on Jerome Powell from Trump. As per Trump's latest statements, he has no intention of dismissing Powell before May 2026.
Sources: ntv.de, mpa/dpa/rts/DJ
- USA
- Jerome Powell
- Donald Trump
- Fed
- Interest rate
- Interest rate decisions
- Tariffs
- Trade conflicts
- Trade relations
- The US Federal Reserve, led by Jerome Powell, has expressed concern about the potential impact of President Trump's tariffs on employment policy and the overall economy.
- The Fed is monitoring the effects of the trade conflict instigated by Trump's tariffs on various factors, including employment, prices, and economic growth.
- Economic uncertainty, partially driven by Trump's trade policies, has led the Fed to take a cautious stance on easing monetary policy and adjusting interest rates.
- Critics debate whether Trump's tariff policies, which include a 10 percent tax on imports from most countries, will deliver the promised long-term benefits for the economy and job growth.
- Trump's tariff policies, especially the 25 percent tariffs on cars, steel, aluminum, and China, have sparked mixed reactions within the American community, with some supporting the move while others fear its implications on employment and their personal finances.
