Unsettled Economy Stays Steady: US Fed Ignore Trump's Call for Rate Cut
Federal Reserve remains steadfast in its rate policy decisions
In casual, chatty style, let's dive into the heated financial scene shaking up the US. Trump's trade policy's making knees wobbly, yet the Fed ain't budging on that key interest rate. Despite Trump's repeated demands for a rate cut, Powell and his crew keep that rate high. Here's the lowdown!
The Federal Reserve, under the watch of our pal Jerome Powell, kept the monetary policy rate steady between 4.25 to 4.50 percent. Yep, that's the deal, allowing banks to borrow from the central bank without any surprises. The move? Predictable as hell, according to analysts. Trump kept hammering about the central bank to ease off and lower interest rates. But the Fed ain't buying it, giving reasons like increased risk of higher inflation – perhaps a nod to Trump's wild trade policy.
Trump has been vocal, complainin' 'bout Fed Chair Jerome Powell. Just recently, he quipped, "I think I got a better handle on this than he does." The Fed, remember, operates without the government's strings attached. The Fed hinted that no rush for rate cuts will hit 'til Trump's trade battle's clearer. That puts Powell and Trump on a collision course!
Before thinking 'bout easing, the Fed wants a better picture of how Trump's trade war's affecting US prices and the economy. And ya know what they said? The damn uncertainty over the economic outlook's increased!
The economy shrank at the start of the year, surprising many after a long, cozy run of growth. Yep, GDP fell by 0.3 percent compared to the previous quarter and year-on-year. But the robust US labor market's a compelling argument for holding off the easing.
Only a Couple of Small Rate Moves Expected This Year
The Fed's mission is to keep inflation tamed. They aim for 2 percent inflation, but US consumer prices jumped 2.4 percent year-on-year in March – up from 2.8 percent in February. What's that mean? Don't know yet, but it's a bit concerning. High interest rates can slow inflation – or, on the flip side, slow the economy.
In September 2022, the Fed began a rate hike with a clear cut of 0.5 percentage points. After that, they took two smaller steps of 0.25 points each. Since then, no further rate adjustments. The central bank of the world's biggest economy expects an average rate of 3.9 percent by 2025, which suggests a couple of small rate moves this year.
Trump's Tariffs Cause Turmoil
Trump's chaotic trade policy's raised chaos on financial markets, fueled by his tireless attacks on Fed Chair Powell. But recently, he reconsidered his plan to oust Powell before his term ends in May 2026.
Economy? "Why'd I do that?" Trump backed off from booting Powell on April 2. Trump slapped tariffs of 10 percent on most imports, with higher tariffs on various partners. He also cranked up tariffs on cars, steel, and aluminum, 25 percent on Canada and Mexico, and 145 percent on China. Trump's administration's cobbling deals with over 15 countries to dodge the higher tariffs.
Trump's placed tariffs at the heart of his economic agenda, promising they'd make America richer and restore manufacturing jobs. However, businesses and individuals worry about the economy due to uncertainty over tariffs and the fear tariffs may push prices higher.
Sources: ntv.de, mpa/dpa/rts/DJ
Facts and Figures:
- Trump's trade policy's pushed the Federal Reserve to maintain a cautious stance on interest rates.
- Despite market expectations for a change, the Fed kept interest rates steady since January 2025.
- Trump's tariffs raised concerns about inflation and economic growth, increasing the risk of stagflation.
- The Fed's adopted a "wait and see" approach, waiting for clear indications of the economic impact prior to making significant policy changes.
- Trump's persistent pleas for a rate cut have fallen on deaf ears at the Federal Reserve, with the monetary policy rate remaining steady, creating tension between the President and the Fed Chair.
- In light of Trump's active trade policy, the Federal Reserve remains cautious, keeping the interest rates steady to dampen the risk of higher inflation.
- The US economy witnessed a minor contraction in the start of 2025, yet the resilient labor market coupled with steady interest rates push analysts to anticipate only a few minor rate moves this year.
- The tariffs imposed by Trump have given rise to concerns about potential inflation and economic growth, leading to increased uncertainty and the possibility of stagflation.
- Despite ongoing criticism from Trump, Jerome Powell, the Federal Reserve Chair, has not acquiesced to the President's demands for easing the monetary policy, citing the need for more clarity on trade policy's economic implications before making significant changes.
