Fed poised to pause anew, defying Trump

Fed Poised to Pause Amidst Political Pressure

As the Federal Reserve prepares for its upcoming meeting, economists predict that interest rate cuts will be put on hold, despite President Donald Trump's intense pressure campaign. Since January, the central bank has kept rates steady, waiting for economic data to reveal the full impact of Trump's tariffs.

The Pressure Cooker

Trump has repeatedly criticized Fed Chair Jerome Powell, labeling him a numbskull and moron. He even made a tense appearance at the Fed construction site alongside Powell. However, economists expect the Fed to remain steadfast in its data-driven approach, ignoring the political pressure.

A Data-Dependent Decision

The Fed's decision-making process is centered around economic indicators, particularly inflation and labor market trends. With Trump's tariffs causing uncertainty, policymakers want to see how prices are affected before making any changes. This data-dependent approach has enraged Trump, who argues that lower rates would boost the economy.

Economic Insights

Oxford Economics' Ryan Sweet expects the Fed to remain on the sidelines, citing the limited impact of tariffs on inflation. He notes that July and August will provide crucial economic data, which may influence the Fed's decision.

A 'Trial Balloon'?

Trump has floated the idea of firing Powell, but analysts believe this was just a trial balloon meant to gauge market reaction. The Fed chair's term ends in 2026, and policymakers are more concerned about labor market trends than Trump's criticism.

Dissent on the Rate-Setting Committee

Some economists expect to see a few members break ranks if the committee decides to hold rates steady again. However, this is not necessarily a sign of Powell losing control; rather, it's a reflection of the uncertainty surrounding tariffs and their impact on inflation.

Labor Market 'Fissures'

Analysts are monitoring labor market trends for signs of weakness. While there have been some concerns about job losses and hiring rates, these fissures have not yet turned into fault lines. If the labor market suddenly weakens, the Fed may reconsider its stance on interest rate cuts.

Conclusion

The Federal Reserve is poised to pause anew, defying Trump's pressure campaign. By focusing on economic data and ignoring political grandstanding, policymakers are making a crucial decision that will impact the global economy. As the dust settles, one thing is clear the Fed's independence is essential for maintaining stability in the face of uncertainty.

Keywords Federal Reserve, interest rates, tariffs, inflation, labor market, Jerome Powell, Trump administration, economic data, monetary policy, central banking.

Edward Lance Arellano Lorilla

CEO / Co-Founder

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