US Federal Reserve Stands Firm Against Trump's Pressure: Interest Rates Remain Unchanged
Heading Toward a Confrontation with Trump: The Federal Reserve Unwavering on Interest Rate Adjustments - Headed for a Clash with Trump: Fed Opting Against Adjusting Interest Rates
The US Federal Reserve (Fed) is sticking to its guns, with the interest rate holding steady at a high level, signaling another confrontation with US President Donald Trump. The central bank's interest rate hovers between 4.25 to 4.5 percent, as announced in Washington, implying business banks can obtain loans at this rate. This anticipated move aligns with analyst predictions, with Trump pushing for a reduction in interest rates in recent weeks. The Fed grounds its decision on heightened risks of inflated inflation, which could be a nod to Trump's intense trade policy.
Trump: "I Got the Guts and Smartness for Inflation Managing"
Trump has publicly criticized Fed Chairman Jerome Powell in recent weeks, stating, "I've got the guts and smarts for inflation managing." The Fed operates independently of the US government, and Powell has made it clear in recent appearances that a quick interest rate cut is highly unlikely. The primary roadblock for this is Trump's aggressive trade policy.
Since taking office, Trump has imposed hefty tariffs on goods from various countries. This economic uncertainty, driven by the potential consequences of this bold strategy, is a major driver of inflation. Although inflation in the US has noticeably eased recently, with US consumer prices rising by only 2.4 percent year-on-year in March, compared to 2.8 percent in February, it remains uncertain whether this trend will sustain. This is due to the fact that March marked the month before Trump unveiled his comprehensive tariff package, imposing broad tariffs on goods worldwide.
Fed: "We're here to Control Inflation"
The Fed's mission is to maintain inflation at stable levels, aiming for an inflation rate of 2 percent. Higher interest rates serve as a tool against escalating consumer prices, as costly loans dampen demand, hopefully leading companies to increase their prices at a slower pace. Conversely, increasing interest rates incentivizes saving, which can slow down the economy.
In September 2022, the Fed started raising interest rates with a substantial 0.5 percentage point cut following a large inflation wave. In the subsequent two months of November and December, two minor 0.25 point hikes followed suit. Since then, the central bank of the world's largest economy has refrained from altering the policy rate despite persistent inflation. The Fed predicts the policy rate will average 3.9 percent in 2025, suggesting two minor rate hikes this year.
Trump: "I Want to Bolster the Economy"
This puts the Fed and Trump on a collision course, with the latter advocating for a significant reduction in interest rates. Trump has always championed low-interest rates, hoping it would support stock markets, minimize government financing costs through debt, and boost economic growth. Recently, Trump had to swallow a bitter pill regarding the economy: the US economy significantly decelerated, and surprisingly shrank during the first quarter of the year.
Experts were not anticipating such a swift development, expecting a noticeable slowdown in growth instead. Trump attributed this development to the economic policy of his predecessor, Joe Biden. However, experts believe that Trump's trade policy will have a negative impact on the economy in the upcoming months and escalate prices. Trump brushes off concerns about high tariffs.
Donald Trump | US Federal Reserve | Interest Rate | Inflation | US President | Jerome Powell | Collision Course | Republican | Leader
- The US Federal Reserve kept the interest rate unchanged, leading to another confrontation with President Donald Trump, as the President has recently advocated for a reduction in interest rates.
- The Fed's decision not to cut interest rates despite Trump's pressure was based on the risk of inflated inflation, which could be a consequence of Trump's aggressive trade policy.
- Despite Trump's criticism of Fed Chairman Jerome Powell and his calls for managing inflation, the Fed remains committed to its mission of maintaining inflation at stable levels, with higher interest rates acting as a tool against escalating consumer prices.
- The Fed's prediction indicates that the policy rate will average 3.9 percent in 2025, suggesting two minor rate hikes this year, a move that may put Trump and the Fed on a collision course, as Trump has consistently championed low-interest rates to support the economy.
- Trump's trade policy, which involves imposing heavy tariffs on goods from various countries, potentially drives economic uncertainty and inflation, contrary to Trump's hopes of bolstering the economy through low-interest rates.
