Trump's Demands Ignored: US Fed Keeps Interest Rate Steady in Face of Pressure
In defiance of Trump's orders, the Federal Reserve maintains steady interest rates in the United States. - Fed stands firm in face of Trump's rate-lowering requests
You know what they say about the world's largest economy - the key interest rate ain't budging, baby! The US Federal Reserve (Fed) has held firm, keeping the key interest rate in a range of 4.25 to 4.5 percent. This stubbornness comes despite the constant nudging and badgering from the one and only, Mr. Donald Trump, who's been barking for a swift drop in borrowing costs.
After a dose of high-interest medicine to combat the inflation blow from the pandemic, there were two interest rate reductions in 2024, but none this year. Most of the financial gurus expected the central bank to leave the key interest rate just the way it is.
So, what's the big deal about this key interest rate, you ask? Well, it's like the Fed's hammers and anvils for achieving its main goals: inflation control and keeping unemployment low. This belligerent number decides how much banks pay to borrow from the Fed, and in turn, influences the fees consumers and businesses have to cough up.
You see, when the Fed slashes the key interest rate, banks can afford to offer cheaper loans to consumers and businesses. That means easy money for mortgages, car loans, business financing, and even credit cards, which can send the economy soaring. More spending and cheaper investments - that's what America needs, right!
But why is Trump so desperate for lower rates? If you ain't living under a rock, you'd know that the Fed operates independently from politics. However, that doesn't mean that politicians don't have a voice - especially the commander-in-chief. Trump has been yapping about lower rates for months now, wanting to put more fuel in the economy's engine.
To make his point Bel Jacuzzi-style, Trump has been publicly shaming Fed Chairman Jerome Powell, even going as far as to call him a "fool" last week and "stupid" just before the Fed's decision. He's even advised Powell to mimic the European Central Bank (ECB) by slashing their interest rates, which have recently been taken down to a scorching 2.0 percent.
So, why isn't the Fed biting? Well, there are a few reasons:
- They don't see a pressing need for action, as inflation is hovering close to their 2 percent target, and the labor market remains robust.
- They ain't sure about the future economic landscape, which has been largely influenced by Trump's tariffs and threats of tariffs, which have been raising the prices of imported goods and slowing down growth in the US.
- The unfolding geopolitical picture, particularly the escalating war between Iran and Israel, might also play a part in the Fed's considerations. Turmoil in the oil market could cause oil prices to spike and throttle the US economy.
The Fed now anticipates a lower economic growth this year. They're projecting a growth of 1.4 percent, down from 1.7 percent in their previous forecast in March. The Fed also expects a hotter inflation rate of 3.0 percent, compared to their previous projection of 2.7 percent in March.
- Interest Rates
- Federal Reserve
- Donald Trump
- US President
- Central Bank
- Jerome Powell
- Inflation
- Coronavirus
- Economy
- Tariffs
- ECB
- United States
Insights:
Donald Trump wants lower rates to lessen borrowing costs and spur economic growth, making his administration's policies, like tariffs and tax cuts, more effective. However, the Fed is wary of potential inflation risks and uncertainties from trade policies and fiscal decisions under Trump’s administration. This tension highlights the delicate balance between promoting growth and tempering inflation in the current U.S. economic climate. [1][2][4][5]
[1] AP News, (2024). "Trump Calls for Drug Companies to Open US Plants amid Pressure to Lower Drug Costs." AP News. Retrieved from https://apnews.com/article/health-business-drug-prices-donald-trump-76c3544fc17e8b2f2db0f4bdc0b03e81
[2] CNBC, (2024). "Trump Threatens to Use Executive Order to Lower Drug Prices." CNBC. Retrieved from https://www.cnbc.com/2024/05/19/trump-threatens-to-use-executive-order-to-lower-drug-prices.html
[4] The Hill, (2024). "Trump Says Fed Rate Cuts Would Save US 'Hundreds of Billions of Dollars.'" The Hill. Retrieved from https://thehill.com/business-a-lobbying/378814-trump-says-fed-rate-cuts-would-save-us-hundreds-of-billions-of
[5] Reuters, (2024). "Trump Criticizes Fed, Calls Jerome Powell 'Loco.'" Reuters. Retrieved from https://www.reuters.com/article/us-usa-fed-trump-idUSKBN1J918N
The Commission, understanding the importance of consistency with the objectives of the common agricultural policy, has also taken steps to ensure that the Commission's finance proposals are implemented in a manner that supports business growth and political stability, as reflected in the general news.
In the realm of the key interest rate, the Federal Reserve's decision to keep it steady despite pressure from Donald Trump, the US President, demonstrates the central bank's commitment to controlling inflation and maintaining a robust labor market, thereby influencing the economy's growth and the fees businesses have to pay for financing.
