The federal reserve officials meet this Tuesday and Wednesday in Washington, and Jerome Powell has already stated it – the interest rates remain exactly where they are.
He pushes the growing political heat of President Donald Trump, who wants them to decrease quickly, and rather stick to the plan: keep stable and look at the figures.
Now Trump is upset. He hammered the Fed constantly on his refusal to cut. The pressure comes not only from him but from members of his team who think that the central bank is dragging his feet.
Powell, stuck in this area, obtained a backup on Friday when work data has shown that the United States added 177,000 jobs in April. This number gave the Fed more breathing to justify maintaining the unchanged prices … at least for the moment.
Trump continues attacks while Powell ignores it
A week ago, Trump exploded Powell on Truth Social, Writing, “There can be a slowdown in the economy unless Mr. Too late, a large loser, reduces interest rates now.” A few days earlier, Trump posted, “Powell's termination cannot come quickly enough!”
But at the end of the week, after the actions took a hit, Trump told journalists that he was not really trying to fire Powell. This did not stop speculation or heat on the Fed.
Even if Trump tries, he will probably not be able to dismiss Powell so easily. The law says that Fed governors can only be deleted for good reason. It is not yet clear if this rule covers the president.
But that did not prevent the administration from taking measures to limit the independence of the Fed. It is already in a legal struggle to extend the power of the White House to agencies like the Fed, in particular those with protections which make them more difficult to influence politically.
The difference between Trump and Powell is simple: Trump wants the drop in key interest rates, and Powell does not. Trump says inflation cools, so the Fed should make it cheaper to borrow. This would make credit cards, mortgages and loans cheaper.
Powell’s goal is to maintain stable prices, even if it means maintaining high borrowing costs. Trump, who has spent most of his business life experienced loans, has always preferred the low rates and said it since his first mandate.
The Fed has eyes on inflation. Their essential inflation gauge shows that prices are ensuring, which normally supports a drop. But the prices increase. This could disrupt the inflation gains. Powell and the rest of the board of directors stop.
Bloomberg Economics predict This Powell will remain firm. Anna Wong, Stuart Paul, Eliza Winger, Estelle or and Chris G. Collins said in a note, “We expect Powell to reject market prices and signal a renewed priority on price stability.”
They also pointed out that Thomas Barkin, president of the Fed of Richmond, and Adriana Kugler, a governor of the Fed, fear that the expectations of inflation will slip. The pay boost in April no longer gives them confidence to resist any drop in rate.
World banks react while the Fed holds motionless
Other central banks do the opposite. The European Central Bank has started to reduce rates. They are trying to stay ahead to slow down the growth linked to American prices. But their most recent inflation report has shown that prices did not drop. One of the basic measures has really increased.
In Canada, things are just as messy. The Bank of Canada abandoned its usual forecasts in April and published two distinct economic scenarios. They couldn't even choose a reference base. The two paths depend on the way in which the price fight of the United States-Canada takes place, which shows how unpredictable the situation is unpredictable at the moment.
This week does not have many major American economic relationships to come. Monday, the Institute for Supply Management will publish its April index of services.
After that, attention will move to unemployment claims. The figures for the week ending on April 26 have reached the highest note since February, although it is mainly because of the recess of New York spring with statistics.
The White House also goes ahead with efforts to reduce Fed surveillance. This is part of a wider strategy to give the presidency more control over independent regulators.
They have already launched a legal action targeting the protections that keep these agencies free from political pressure. And that includes the Fed.
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