Central Bank Anticipated to Maintain Interest Rates, Frustrating President Trump
Revamped Article:
Here's the lowdown on the US Federal Reserve's upcoming interest rate decision. Goldman Sachs has predicted that the Fed won't be slashing rates until July, potentially reigniting a spat between President Trump and Jerome Powell, the Fed chair.
The Federal Reserve has been hesitant to take a dive on interest rates, thanks to an uncertain outlook regarding the impact of the trade war on US prices and growth. Right now, the reasonable range of 4.25% to 4.5% ain't gonna budge, according to leading experts, given the turmoil brought about by US tariffs.
Goldman Sachs expects only three consecutive quarter-point cuts to be delayed until later in the summer, owing to mixed signals and a grim economic forecast. Trump called for more cuts last month due to a lowered inflation rate, but the Fed sees price growth staying high at 2.7% this year.
Last week's data indicated a relatively healthy labor market, though most analysts foresee a bleak future for the US economy. A report by Goldman Sachs stated that Fed officials have acknowledged the risks from tariffs, both to their goals of stable prices and full employment. They plan to wait for a clearer picture.
If economic conditions worsen due to tariff impacts, and the unemployment rate starts creeping up unless they intervene, the Fed might decide to lower rates, despite concerns about high inflation. The report added that the Fed leadership wouldn't be too bothered by temporary tariff-driven price increases, especially in a weak economy.
CME Group predicts a 97% chance of the Fed keeping rates unchanged today. Wall Street's heavyweights believe that the Fed could hold rates steady for the rest of the year. Morgan Stanley's chief US economist, Michael Gapen, thinks tariffs would keep the Fed on the sidelines unless the economy slides into a recession. UBS Global Wealth Management economist, Paul Donovan, believes further surprise tariff announcements complicate the Fed's job.
Trump's aggressive criticism of Powell has subsided slightly since he dismissed the idea of firing the Fed chair last week. However, economists will be closely watching Powell's response to Trump's repeated demands during a press conference post the decision.
The Bank of England's Monetary Policy Committee (MPC) will also keep tabs on the Fed's analysis of the US economy's outlook, as lower growth could dampen demand for UK exports. The MPC will announce its decision on interest rates at 12:02pm on Thursday, with most forecasters predicting a 25 basis point cut to 4.25%. The MPC's meeting minutes will likely contain key insights on the US economy and preliminary views on the impact of Trump's tariffs on the UK economy.
[Enrichment Data: The May 2025 Federal Open Market Committee (FOMC) meeting resulted in the decision to maintain the federal funds target range between 4.25% and 4.50%. The economy continued to grow with a low unemployment rate and elevated inflation levels. Overall, the decision reflected the Fed's goal of achieving maximum employment and price stability.]
- The upcoming interest rate decision by the Federal Reserve is a hot topic in the realm of finance, business, and general news, as its potential impact on the economy is closely monitored by various banking institutions and market analysts.
- As the trade war continues to affect US prices and growth, the probability of the Federal Reserve reducing interest rates has become a point of interest in the intertwining spheres of politics and economics.
- The Bank of England's Monetary Policy Committee (MPC) is keeping a watchful eye on the Fed's analysis of the US economy's outlook, as the potential outcome could influence the demand for UK exports, thereby impacting the banking sector and markets in the UK.
