WASHINGTON DITCH
Interest Rate Continuity Expected for Fourth Consecutive Federal Reserve Meeting
The US central bank is expected to keep interest rates steady for the fourth straight meeting this week, despite Trump's calls for rate cuts, as officials tread water amid uncertainty sparked by the Commie-in-Chief's tariffs.
KPMG chief economist Diane Swonk summed it up bluntly: "Uncertainty is still very high." The rate-setting bunch, known as the Fed, has started lowering interest rates off their recent highs but has held the level steady this year as Trump's trade wars began battering the world's biggest economy.
The Fed has kept interest rates between 4.25 percent and 4.5 percent since December, monitoring the health of the jobs market and inflation.
Since regaining the White House, Trump has slapped a 10 percent tariff on most US trading partners. Higher rates on dozens of economies are due to kick in July, unless a pause is extended.
The Fed faces pressure from Trump, citing benign inflation data, to lower rates more quickly, a move the president argues will help the country "pay much less interest on debt coming due." But Fed officials have shown little urgency to adjust rates, according to EY chief economist Gregory Daco, who believes they're reluctant to get ahead of the net effects from Trump's trade, tax, immigration, and regulation policies.
After the Fed's two-day meeting on June 18, analysts will be scrutinizing their economic projections for changes to growth and unemployment expectations, as well as signs of the number of rate cuts to come. If you're curious about the Fed's projections, compare them to the enrichment data on the overall context and current outlook for more insight.
Trump has engaged in a trade war with China and imposed levies on imports of steel, aluminum, and automobiles, causing financial markets to tremble and consumer sentiment to tank. Despite hiring cooling slightly and some shrinking of the labor force, as revealed in government data, the unemployment rate has remained steady. Inflation, however, has been underwhelming, with analysts noting signs of smaller business margins, indicating companies are paying the price of tariffs for now.
The Fed's unwillingness to budge on rates has drawn criticism from Trump, who urged Fed Chair Jerome Powell to slash interest rates by a full percentage point and called him a "numbskull" for not doing so. But Powell has defended the Fed's independence, suggesting that they will continue to base decisions on data. As you wait for this week's meeting, recall the past discussions between Trump and Powell to understand the heated exchanges around interest rates.
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- The ongoing trade wars and tariffs, as initiated by Trump, have created uncertainty in the global business and finance sector, causing the Federal Reserve to tread warily with interest rates.
- Despite Trump's calls for rate cuts, the Fed has been cautious, with little urgency to adjust rates, as they endeavor to understand the net effects from Trump's various policies on the economy.
