The Federal Reserve is expected to keep interest rates unchanged on Wednesday, despite President Donald Trump’s pressure campaign to boost the US economy with lower rates. The Fed’s rate-setting committee will meet for two days to discuss monetary policy, and market projections indicate that it won’t cut its key rate.
Analysts expect Chair Jerome Powell to reiterate his view that the Fed can afford to remain on hold to assess the impact of Trump’s tariffs on the economy. Data suggests that the economy is in solid shape, with a low unemployment rate of 4.1% and robust growth data.
However, inflation is a major wild card, and Trump’s tariffs have introduced uncertainty into the picture. The Fed is weighing whether to loosen the flow of cash into the economy, which could risk rising prices.
Trump has been pushing for lower interest rates, claiming it would boost the economy by making borrowing cheaper. However, the Fed has shown no signs of giving in to political pressure. Powell has stated that the Fed might have cut rates already were it not for Trump’s tariff policy.
The Fed’s decision is not without controversy, as some experts worry about the central bank’s independence and immunity from political interference. The committee meets eight times a year to discuss monetary policy, and a simple majority vote is required for a rate change.
Analysts predict that if the FOMC doesn’t lower rates this month, it may happen before the end of the year. However, a cut in interest rates may not immediately translate into reduced borrowing costs for consumers.
The Federal Reserve’s decision is influenced by inflation expectations and the yield on 10-year Treasury bonds. If investors expect price growth to erode purchasing power, they will ask for higher interest rates. The Fed has set its key rate range of 4.25% to 4.5% this year to curb inflation.
Trump’s efforts to remove Powell as Fed chair have raised concerns about the stability of the US economy. Analysts warn that removing Powell would trigger stock market volatility and push home mortgage rates higher.
Source: https://www.nbcnews.com/business/economy/why-the-federal-reserve-has-not-lowered-interest-rates-trump-pressure-rcna221166