Central Bank of the United States disregards Trump's calls to lower interest rate - In the face of Trump's requests, the US Federal Reserve remains unmoved in its decision to keep interest rates unchanged.
Unwavering on Interest Rates: The Fed Stands Firm Against Trump's Pressure
It's money talks, alright. The interest rate in the US, the biggest economic powerhouse in the world, stays put at a fairly steep level of 4.25 - 4.5 percent. And guess who's got a bone to pick ‘bout that? Mr. Trump, that's who. This old bull wants looser monetary policies, primarily the key interest rate, slashed for a quicker economy boost, but the rugged Fed ain't budging.
Post the high-interest era to curb runaway inflation after COVID-19, there were two rate drops in the US in 2024, none this year. Most analysts anticipated the central bank to keep the key interest rate just as it is.
The Nitty-Gritty of Key Interest Rates
The key interest rate is the Fed's main weapon to achieve its twin goals: pegging inflation and keeping unemployment in check. This rate determines the rate at which banks can chow down on cheap loans from the Fed. The key rate ripples down to interest rates that consumers and businesses have to pay.
For instance, if the Fed dials down the key interest rate, banks' lending rates become more affordable over time. This affects home loans, car loans, business financing, you name it. Cheaper borrowing can whip up the economy as consumers splurge more and credit-backed investments become cost-friendly.
Why Trump Demands Cheap Money Like a Kid Craves Candy
Remember the Fed, it's independent. Politics can't rock the boat directly when it comes to rate decisions. Yet, Trump being Trump, he's still all mouth. He's been jawing about lower rates for ages, hoping they'd give the economy an extra kick. To drive home his point, he's slammed Fed Chairman Jerome Powell as a "moron" and last week called him a "numbskull." He's also suggested the Fed to emulate the European Central Bank's (ECB) rate cuts, now sitting pretty at 2 percent.
Why the Fed's Sayin' "Nah" to Trump's Sweet Talk
These days, here are the main reasons for the Fed's stance:
- The economy is ticking along quite nicely with inflation right about the 2 percent mark and the labor market in good health.
- Economic turbulence lurks around the corner, largely due to tariffs and trade disputes. Trump's penchant for hefty tariffs on foreign goods could increase the price of stuff from abroad and slow economic growth. Plus, his trade policies have kept the stock and bond markets jittery.
- Geopolitics plays a role too. Suppose Iran and Israel get into a full-blown scrap, potentially with US military involvement. That could trigger serious blips in the oil market. Soaring oil prices could dampen the US economy.
Expectations Edge Downwards
The Fed now anticipates the economy to grow at a snail's pace of 1.4 percent this year, compared to its previous forecast of 1.7 percent. The central bank also predicts a higher inflation rate of 3 percent, up from its earlier expectation of 2.7 percent.
- Trade Tensions
- Federal Reserve
- Tariffs
- Donald Trump
- United States
- Jerome Powell
- European Central Bank
- Covid-19
- Inflation
- Economy
The Commission, in light of the ongoing economic complications, might consider modifying the key interest rate to stimulate business growth and ensure finance remains accessible, mirroring the current low rates set by the European Central Bank.
Moreover, the recent trade disputes and tariffs implemented by the Trump administration could potentially impact the US's common agricultural policy, necessitating careful planning and strategies that align with the objectives of the policy in order to maintain its effectiveness.
