Central Bank Likely to Oppose Trump's Demand, Maintain Interest Rates in Current Week
Hangin' With the Fed:
WASHINGTON (AP) - The Federal Reserve's going to keep its mojo rate just where it's at on Wednesday, despite Donald Trump's relentless whining for a rate drop. Yeah, you heard that right, the President's been getting his paws all over the economic pie, pushing for lower borrowing costs.
But here's the thing: Trump's bark's been worse than his bite. After triggering a stock market nose-dive by suggesting he might can Jerome Powell, he backed down and claimed he ain't gonna fire the Fed chair. Still, he and Steve Mnuchin, Trump's Treasury Secretary, reckon the Fed should slash rates.
They're thinking that inflation's cooling, and the high-interest rates of yore are no longer needed to hold down prices. The Fed cranked up its short-term interest rate in '22 and '23 to combat pandemic-era inflation, but that's history now, buddy.
Now, Elon Musk, chief dog at Trump's Department of Government Efficiency, incited a storm last Wednesday, suggesting DOGE should take a gander at the Fed's spending on its facilities. Guess the pressure hasn't quite let up on the ol' Fed yet, even if Trump's backing off his threats to ax Powell.
Trump's got the guts to call the shots, even if the Fed is an independent agency, ya feel?
What Else is Cookin' in the White House?
- Trump wants to wipe out the National Endowment for the Arts
- Mexico's prez said no way to Trump's plan for sending U.S. troops over the border
- The dance keeps getting stranger in the national security team
- Veterans are raising hell over Trump's plan to rename Veterans Day
- Trump's legal troubles ain't over, thanks to that pesky judge
- Spies might be in for some tough times under Trump
Even so, the Fed's 'bout to leave that rate right where it is, likely at about 4.3%. Powell and his gang of 18 hepcats on the rate-setting committee have said they wanna see how Trump's tariffs affect the economy before they make any moves.
But Trump ain't happy about that, and went ballistic on Truth Social on Friday: "NO INFLATION!" The guy's got egg on his face 'cause grocery prices went up 0.5% in two out of the last three months, and they're 2.4% higher than they were last year. Gas prices are down, but they're still at an average of $3.18 a gallon.
Plummeting inflation in March was a hopeful sign, but it was still at 3.6% in the first three months of the year, way over the Fed's target of 2%. Without the tariffs, some economists say the Fed would cut its benchmark rate 'cause, well, it's supposed to be slowing borrowing and spending, and cooling inflation. But with Trump's tariffs, price increases could crop up, leaving the Fed in a pickle, stuck between cooling inflation and strengthening the economy.
Granted, the Fed could've cut rates if the tariffs weren't a factor. But they might've had to boost 'em again soon due to sustained inflation. Vincent Reinhart, the chief economist at BNY, says the Fed's "daunted" by what happened in '21, when inflation surged due to supply snarls, and the central bank called it "transitory." This time, Reinhart thinks the Fed's gonna take its sweet time, waiting for solid proof before making any moves, 'cause inflation's hard to control without draggin' the economy into a recession.
Preston Mui, an economist at Employ America, agrees: “You could imagine a world where there ain't pressure from the Trump administration, and they cut rates ... sooner, because they feel comfortable making the case that they're doin' so because of the data."
As for Powell, he's said that tariffs are likely to raise prices and slow the economy, which is a tricky combo for the Fed. Normally, they'd raise rates to cool inflation and keep it in check, or cut 'em to give the economy an energy burst if unemployment rises. But Powell's not got a straightforward choice here—he might have to wait and see if the tariffs sustainably push up inflation before making a move.
Some economists think the Fed's first rate cut won't happen until September or later. But if the tariffs really start to hurt the economy, Wall Street investors reckon the Fed might act sooner, so say their futures prices.
Lastly, Musk took the Fed to task on Wednesday for spending $2.5 billion on renovations for its Washington, D.C. digs, which he thinks might be a bit lavish for the 'lower class' taxpayer. Fed officials admit that the cost of the renovations spiked as materials and labor prices shot up amid inflation, while some former Fed officials say local regulations forced them to burrow deeper instead of building upward, driving up the costs.
Guess that's what you get when you play economist, Mr. Musk. But hey, at least the Fed ain't lost its touch—they've got politics, inflation, and a dash of renovation drama to keep 'em busy. Let's hope they don't get burned by any of it.
- The business community is closely watching the political tensions between Trump and the Federal Reserve, as the president's pressure on the central bank to lower interest rates continues.
- Despite Trump's persistence, the Federal Reserve is expected to keep the current interest rate unchanged, with potential concerns about the impact of his tariffs on the economy.
- In other political news, Elon Musk, a key figure in the Trump administration's Department of Government Efficiency, is urging scrutiny of the Federal Reserve's spending on facilities, marking continued pressure on the central bank.
- The economy is also facing another challenge with the possibility of Trump dismantling the National Endowment for the Arts, which could have effects on the arts and cultural sectors in Seattle and beyond.
- Meanwhile, the general news landscape is filled with ongoing legal troubles for Trump, alongside international disagreements, national security concerns, and veterans' concerns over potential changes to Veterans Day, adding to the complexity of the current economic climate.
