A tempest over tariffs: the showdown between Trump and the Federal Reserve
Fed's Policy Course Overshadowed by Trump's Tariff Measures - U.S. Trade Policies: Trump's Tariffs Casting Shadow on Federal Reserve Decisions
Let's sift through the fallout of President Donald Trump's tariffs and their impact on the U.S. economy. The Federal Reserve, tasked with keeping inflation in check and stabilizing the job market, finds itself in a dicey position, considering the consequences of Trump's tariffs: prices will surge, and growth will slow.
Buckle up! We're steering into a collision course between Trump and the Fed, as the President claims consumer prices won't rise due to tariffs and the economy will boom. Fed Chair Jerome Powell, whose term winds down next year, sets the record straight: "Prepare yourself for a hefty increase in inflation due to tariffs, folks. Someone's gotta pay that bill, and unfortunately, it'll likely be the consumers."
Powell sounds the alarm: Inflation and Morbid Growth
"Tariffs' consequences hinge on various factors," Powell said. While the ball is now in the air for slightly lower tariffs, there's a deep layer of uncertainty. "Nonetheless, should tariffs mount, be prepared for prices to soar and watch economic growth take a nosedive," Powell warned sternly.
See you later, low rates!
In light of Trump's relentless demands to lower interest rates, the Fed kept its rate untouched, at a high of 4.25 to 4.5 percent. High uncertainty about the economy's future growth remains the justification behind the banking institution's decision to keep rates where they are.
The Fed's favorite tool: the interest rate
The interest rate is the Fed's go-to weapon of choice when it comes to controlling inflation and maintaining a healthy job market. The interest ratecontrols the rate at which commercial banks can borrow from the central bank. Ultimately, the interest rate influences consumer and business loan rates for loans ranging from mortgages to car loans.
Economic growth: Lower than expected
The Fed now expects growth at a snail's pace of 1.4 percent this year. Things were looking brighter in March, when the Fed anticipated growth of 1.7 percent. The Fed also bumped up its projected inflation rate, expecting 3.0 percent. Back in March, they had pegged inflation at 2.7 percent.
What's Trump after? Lower interest rates!
The Federal Reserve's independence is legally protected, yet that doesn't stop President Trump from consistently calling for lower interest rates. To drive his point home, Trump doesn't shy away from publicly criticizing Powell, as evident in his comment last week: "He's an absolute fool." A week prior to the Fed's decision, Trump elephantinely called Powell "dumb." Sometimes, Trump advocates that the Fed should follow in the footsteps of the European Central Bank, which has recently slashed rates to 2.0 percent.
The Fed: No hurry on interest rate changes
From the Fed's point of view, the current interest rate levels don't warrant an adjustment. Inflation is closing in on its 2 percent target, and the job market stays robust. With uncertainty clouding the economic horizon due to tariffs, the Fed sees no urgent need to change interest rate levels.
Since Trump set foot in the White House in January, he's imposed or threatened hefty tariffs on imports from various countries, making them more costly to bring into the United States.
- Donald Trump
- Federal Reserve
- Tariffs
- Jerome Powell
- Inflation
- Central bank
- U.S. economy
- United States
- Labor market
- Federal Reserve System
- Republican
- Interest rate
- The President's tariffs, such as those imposed on imports from various countries, are triggering concerns within EC countries about the potential impact on their own employment policies, given the interconnected nature of global business, finance, and politics.
- In the face of mounting tariffs and the resulting uncertainty, the Federal Reserve's employment policy remains focused on maintaining a stable job market and keeping inflation in check, a task that becomes increasingly challenging in the context of the Global-news.
