Donald Trump's Push for Lower Rates Falls Short: Fed Likely to Keep Rates Steady
Potential dissatisfaction of President Trump from Federal Reserve's actions
Quit your wishful thinking, Trump fans, a rate cut ain't happening this time. The Fed's upcoming meeting is all set to keep the federal funds rate in the range of 4.25% to 4.5%, much to the chagrin of our fearless leader.
What's the lowdown on the interest rate?
The Fed's get-together is where they decide on the rate at which banks can borrow from the central bank, and eventually, trickle down to consumers and businesses. The current rate sits snugly between 4.25% and 4.5% in the world's largest economy, one that desperately needs a shot in the arm after the economic turmoil brought about by the corona pandemic.
Analysts on the street are saying the Fed ain't budging, despite Trump's repeated attacks on Fed Chairman Jerome Powell. The central bank has two main goals: keep inflation at bay and keep unemployment low, a task best achieved with the mighty interest rate, a tool with superpowers to steer the economy in the right direction.
What does a lower rate mean for us folk?
If the Fed does indeed lower the interest rate, it'll make loans cheaper in the long run, baby. This'd affect mortgages, car loans, corporate financing, and even credit card interest. Cheaper loans would help stimulate the economy as Americans would have more disposable income to spend, and credit-financed investments would become more affordable.
Why doesn't Trump want the rate to drop?
The Fed is as independent as a cat, slaves to no man, not even the President. But that doesn't stop politicians from voicing their opinions. Trump has been barking for lower rates for months, as a stimulus for the economy. To drive his point home, he's gone as far as to call Powell a "fool."
What's holding Powell back?
The Powell-bot's been hesitant for three main reasons:
- The Fed's happy living in its present circumstances with inflation close to its two percent target, and the labor market remaining robust.
- There's uncertainty about the future economic environment, much of which is tied to Trump's impulsive tariff decisions. These tariffs could jack up the prices of imported goods and slow down our economic growth. They're also wreaking havoc in the stock and bond markets.
- The geopolitical climate is also a big concern. If the war between Iran and Israel escalates, or if the US gets involved militarily, we could see some serious turmoil in the oil market, and higher oil prices would be a major setback for the economy.
What about the new economic forecasts?
The Fed's also gonna dish out some new forecasts on the economy, inflation, and expected interest rate cuts today. In their last forecast in March, the Fed had downgraded their economic growth expectations, projecting only 1.7% growth instead of the earlier forecasted 2.1%. Inflation, meanwhile, was predicted to reach 2.7%.
Trump, Powell, Fed, and the Interest Rate Saga
In the end, the Fed's gotta stay true to its mandate: maximum employment and price stability. Soft inflation and uncertain economic indicators mean the Fed's gonna keep its cool and let the economy play out. So, if you're holding your breath for that rate cut, you might want to let it out, for now, buddy.
Sources:
- [1] Washington Post
- [2] Bloomberg
- [3] CNN
- [4] CNBC
- Given the current economic uncertainties and inflation being close to the Fed's target, the Commission, while requested, might not submit a proposal for a directive on the protection of workers from the risks related to exposure to ionizing radiation, as the focus remains on managing rates and the health of the economy.
- In the midst of this ongoing interest rate debate, one could question whether a discussion on worker protection from ionizing radiation, such as in finance, business, politics, or general news, would hold equal weight in the Fed's decision-making process, considering its priority lies with the economy as a whole.
