Do not expect the Federal Reserve to reduce interest rates this week despite a series of harsh criticism from Trump
The Federal Reserve is likely to maintain the main interest rate in the short term without changing on Wednesday, despite weeks of Harsh criticism President Donald Trump is calling for the federal reserve to reduce borrowing costs.
After a sharp decrease in the financial markets two weeks ago by saying that he could shoot at Federal Reserve Chairman Jerome Powell, Trump later fadedHe saidHe had no intention to do this. However, he and Treasury Secretary Scott Payett said that the Federal Reserve should reduce prices.
They argue that inflation has been steadily cooled and there is no longer a high level of borrowing costs for price increases. The Federal Reserve raised a sharp rate of short -term in 2022 and 2023 with high inflation in the epidemic.
Separately, Elon Musk, Trump presidentMinistry of Governmental efficiencyAnd last Wednesday suggested that Doge should be closely seen in the spending of the Federal Reserve on its facilities.
The increasing scrutiny shows that even when the Trump administration stops its threats to shoot Powell, the Federal Reserve is still subject to unusually severe political pressure, although it is placed as an independent agency.
However, the Federal Reserve will surely leave its main rate unchanged at about 4.3 % when it meets Tuesday and Wednesday. Powell and many other 18 officials sitting on the Federal Reserve Defense Committee said they want to see how Trump is identifying.It affects the economyBefore making any moves.
However, Trump said on Friday on the social media platformSocial truthThere is no “inflation” and claimed that the prices of groceries and eggs have decreased, and that the gas has decreased to $ 1.98 per gallon.
This is not completely true: grocery prices have jumped by 0.5 % in two months of the past three months and increased by 2.4 % from last year. Gas and oil prices decreased-gas costs decreased by 10 % from the past year-and continued in a long-term direction partially continued due to fears that the economy would weaken. However, AAA says gas prices all over the country $ 3.18 per gallon.
The act of inflationIt decreased significantly in MarchA fan of encouraging, although in the first three months of the year it was 3.6 %, according to the Federal Reserve, much higher than its 2 % goal.
Without customs tariffs, economists say it is possible that the Federal Reserve can soon reduce its standard price, because it is currently at a level aimed at slowing borrowing, spending and cold inflation. However, the Federal Reserve cannot now reduce interest rates through Trump’s broad definitions that are likely to raise prices in the coming months.
Vincent Rinhart, the chief economist in BNY, said that the Federal Reserve “was” delegated “to what happened in 2021, when the prices rose amid the exhibitors, Powell and other officials said the increase would be” passing. ” Instead, inflation increased to a peak of 9.1 % in June 2022.
He said this time they will be more careful.
“This is under the federal reserve, he will have to wait for evidence and be slow to adapt to this evidence,” said Renhart.
In addition, the Trump Roma from Powell makes itThe most difficult in the Federal Reserve Chair to reduce pricesPreston Moy, an economist in America, said that doing this any time will be seen as walking in the White House.
He said: “You can imagine a world where there is no pressure from the Trump administration and reduce prices … because they feel comfortable in making the argument that they are doing this because of the data.”
For his part, Powell saidlast monthThe definitions are likely to push inflation and slow down the economy, which is a difficult mix of the federal reserve. The central bank usually raises prices – or at least keeping it high – to fight inflation, while it would cut it to stimulate the economy if unemployment rises.
Powell said that the impact of definitions on inflation may be temporary-an increase in prices for one time-but recently he said it “could also be more stable.” This indicates that Powell will want to wait for several months, to ensure that the definitions are not sustained sustainable before considering prices cut.
Some economists expect that the Federal Reserve will not reduce prices until its meeting in September, or even later.
However, federal reserve officials can move soon if the customs tariff hit the economy sufficiently to cause the demobilization of workers and raise unemployment. Wall Street’s investors appear to expect such a result – they will happen first in JulyFutures prices.
Separately, Federal Reserve on Wednesday criticized his spending $ 2.5 billion on a wide renovation of two buildings in Washington, DC.
“Since at the end of the day, this is all taxpayer money, we must definitely search to see if the federal reserve spends $ 2.5 billion on its internal designer,” Musk said. “This is eyebrows.”
Federal Reserve officials admit that the cost of renovations has increased with the high prices of building materials and employment amid postpartum inflation. Former federal reserve officials, speaking on the background, say the local regulations forced the Federal Reserve to do more underground expansion, instead of making the buildings longer, adding to the cost.
Meanwhile, Kevin Wrash, a former Federal Reserve Governor, and a possible candidate to replace Powell as president when Powell’s term ends next year, said that the Federal Reserve has attracted more scrutiny due to his failure to maintain prices.
“The current Federal Reserve wounds are largely present.” “The strategic re -appointment is necessary to alleviate the losses of credibility, changes in standing, and most importantly, economic results are worse for our citizens.”
Powell, for his part, said last month that “the independence of independence feeding is understandable and widely supported in Washington, in Congress, where it really matters,” Powell, for his part, said last month.
This story was originally shown on Fortune.com
