Fed would not have reduced interest rates in this year, according to Powell, due to the presence of tariffs.
In a series of public attacks, former US President Donald Trump criticised Jerome Powell, Chair of the Federal Reserve, for maintaining higher interest rates compared to other nations, claiming it was costing the USA a fortune. Despite these criticisms, Powell avoided commenting on Trump's attacks during a recent conference, including when asked if Trump's harsh public comments make it difficult to conduct monetary policy.
Trump's persistent criticism of Powell has included derogatory names like "numbskull" and "moron" for not lowering interest rates yet. However, the available information does not specify any specific policy changes made by President Trump that influenced the Federal Reserve's decision not to lower interest rates this year. Instead, it seems that Trump's influence was expressed through public and political pressure rather than identifiable policy changes.
Powell, who has focused on delivering macro, financial, and economic stability for the benefit of all people, has maintained a non-political approach to policymaking. This approach was publicly backed by European Central Bank President Christine Lagarde, who praised Powell as a courageous central banker. Lagarde agreed with Powell's approach to policymaking and stated that she would handle criticism similarly if in his position. Conference attendees clapped after Lagarde's comment about Powell's non-political approach to monetary policy.
Despite Trump's calls for easing monetary policy, the Federal Reserve has not lowered interest rates at all this year. However, a solid majority of Fed officials expect to begin reducing interest rates again later this year, depending on what happens with inflation and the labor market. Two of Powell's colleagues, Michelle Bowman and Christopher Waller, have recently suggested that the Fed could consider a rate cut as soon as July.
Investors estimate an 81% chance of the Fed holding rates steady at its July 29-30 meeting. Powell himself has been cautious about discussing future rate decisions, stating that he wouldn't take any meeting off the table or put it directly on the table regarding a rate cut in July.
Central bankers expect President Trump's tariffs to have some effect on the US economy, but the impact of Trump's public pressure on Powell has not been directly linked to the Fed's decision on interest rates this year. As the world watches, the Fed continues to navigate the complexities of monetary policy with a focus on maintaining economic stability.
[1] The specific policy changes made by President Donald Trump that influenced the Federal Reserve's decision not to lower interest rates this year are not detailed in the available information.
- The lack of identified policy changes by President Donald Trump contributing to the Federal Reserve's decision not to lower interest rates this year suggests that his influence might be exerted through public and political pressure rather than specific policy changes.
- While President Trump has emphasized easing monetary policy, the Federal Reserve, with Powell at its helm, has maintained a non-political approach to policymaking, which has been supported by European Central Bank President Christine Lagarde.
