Concerns about employment sector: Federal Reserve reduces interest rates in the United States
The US Federal Reserve has made a significant move by cutting interest rates for the first time in nearly a year and a half. This decision, which was announced in March 2025, comes amidst a revised downward trend in job creation over the past 12 months, with a total of 911,000 fewer jobs created compared to initial estimates.
The rate cut, which is expected to be reduced by 25 basis points at each of the remaining two meetings, according to Thomas Gitzel, chief economist at VP Bank, aims to make loans cheaper for businesses and consumers. This move is part of President Trump's efforts to boost the economy, make homeownership more affordable for Americans, and reduce the interest burden on the national debt.
However, the slowdown in employment growth has pushed inflation risks related to US tariffs into the background, according to Kfw economist Dirk Schumacher. The Fed has indicated that further rate cuts are possible by the end of the year, but the question of the Fed's independence remains, as long as Trump is president. The intense pressure from the White House may not have played a significant role in the current interest rate decision, but it has raised concerns about the Fed's independence.
The Fed's decision has also had an impact on the global economy. The European Union's common currency briefly rose above 1.19 US dollars, reaching its highest level since June 2021, due to the rate cut. This has benefited European vacationers in the US as it reduces the attractiveness of the US dollar and strengthens the euro.
The Federal Reserve Board's decision-making process has been under scrutiny, with President Trump repeatedly pushing for interest rate cuts and labeling Fed Chair Jerome Powell a "fool" on multiple occasions. Trump has also initiated the dismissal of Fed Governor Lisa Cook, who is currently defending herself legally against these attempts.
The appointment of Stephen Miran as an interim solution on the Fed board has further fuelled speculation. While some see him as a potential ally of President Trump, skeptics like Democratic Senator Elizabeth Warren have accused him of being "Trump's puppet". Miran, however, has promised to "preserve" the independence of the central bank.
Looking ahead, the next step involves maintaining the independence of central banks despite political pressures. The Bundesbank emphasizes the importance of central bank independence for stable inflation and economic growth, implying continued vigilance and cooperation at the institutional level rather than direct political intervention. The new interest rate range is 4.0 to 4.25 percent.
Young adults and minorities are currently having particular difficulty finding jobs, according to Fed Chair Jerome Powell. This is a concern that needs to be addressed as the economy moves forward, with the Fed's rate cut being just one part of a broader economic strategy.
Read also:
- Shaping India's Economic Progression: Readying the Financial System for Tomorrow
- Two farmers in Zambia take legal action against two firms with Chinese connections, alleging an ecological disaster caused by their operations.
- Deepening EU-India relations despite apprehensions regarding Moscow connections
- Ongoing Transition Towards Cleanliness
