Federal Reserve will probably keep Without changes to his short -term interest rate on Wednesday, Despite the weeks of criticism and requests of the president Donald Trump for the Fed to reduce debt costs.
After causing a strong drop in financial markets two weeks ago, saying this I could say goodbye to the president of the Fed, Jerome PowellTrump reversed later and said he hadn’t intended to do it. Even like this, he and the secretary of the treasureScott Bestent said the Fed should cut the types.
They support it Inflation has constantly cooled And that the high costs of loans are no longer necessary to contain the increase in prices. The Fed abruptly raised its short -term type In 2022 and 2023 when the inflation of the era of the pandemic stain.
Separately, Elon MuskThe head of the Trump government’s efficiency department, suggested last Wednesday that Doge should examine more closely the expenses of the Fed in its structures. The greatest control shows that even during the administration Trump dates back to his threats to the fire Powell, the Fed is still subject to political pressure, despite his independent agency conditions.
The Fed is likely to remain firm this week
Even so, it is almost certain that The Fed will leave its key rate without changes around 4.3% When he gathered on Tuesday and Wednesday. Powell and many other 18 officials who sit in the Fed rates fixing committee have said this They want to see how Trump’s rates They affect the economy before making any movement. Trump, however, said on Friday on the social media social truth platform “There is no inflation” and he said that the prices of the edibles And the eggs fell and that the petrol dropped to $ 1.98 (1.8 euros) the gallon.
This is not entirely true: food prices have increased by 0.5% in two of the last three months and have increased by 2.4% for one year. Petrol and oil prices have decreasedThe cost of gasoline decreased by 10% compared to a year ago, following a trend that has been maintained longer, in part due to the fear that the economy weakens. Even so, AAA states that the average price of petrol throughout the country is $ 3.18 (2.8 euros) the gallon.
Inflation dropped significantly in MarchAn encouraging signal, although in the first three months of the year it was 3.6%, according to the favorite indicator of the Federal Reserve, well above its 2%goal.
Rates are likely to delay the cuts of the type
No rate, Economists say it is possible that Federal Reserve soon reduces its interest rate reference, because it is currently at a level to stop debt, spending and fresh inflation. However, the Fed cannot now cut the types with the large Trump rates that will probably increase prices in the coming months.
Vincent Reinhart, BNY economist leader, said that the Fed is “marked” for what happened in 2021, when prices increased due to offer and offer problems and Powell and other Fed officials said that the increase would probably be “transient”. Instead, inflation reached up to a maximum of 9.1% in June 2022.
This time they will be more cautious, he said. “This is a Fed who will have to wait for evidence and be slow to adapt to such tests,” said Reinhart. Moreover, Trump’s harassment for Powell make him more difficult For the president of the Fed to cut the rates for doing it at any time it would soon be seen as kneeling in front of the White House, said Preston Mii, an economist of America of employment.
“You could imagine A world in which there is no pressureby the Administration Trump and cut the types … before, because they feel comfortable claiming that they do it because of the data, “he said. For them, Powell said last month that the rates would probably increase inflation and slow down the economy, a delicate combination for the Fed.
The central bank would normally increase the types, or at least it would keep them high, To combat inflationwhile they would cut them to stimulate the economy if unemployment increased.
Powell said that the impact of inflation rates could be temporary, an increase in single prices, but more recently he said that “it could also be more persistent”. This suggests that Powell will want to waitpotentially for months, To make sure the rates do not increase inflation supported before considering a type cut.
The cuts to the type of power supply may still take a few months
Some economists foresee it The Fed will not cut the types Until its September meeting or even later. However, Fed officials could act first If the rates affect the economy enough to cause layoffs and increase unemployment. Wall Street investors seem to expect this to happen and expect the first cut to take place in July, according to the prices of the future.
Moreover, Musk criticized the Federal Reserve on Wednesday To spend 2.5 billion dollars (2.2 billion euros) in a large renewal of two of its buildings in Washington DC “Since, after all, these are the money of taxpayersWe should check if the Federal Reserve is spending 2.5 billion dollars for its interior designer, “Musk said.” That is, raise the eyebrows. “
ADVERTISINGFederal Reserve officials recognize him The cost of renovation has increasedSince the prices of construction and work materials have triggered due to post-pandemic inflation. And the former Fed officials, who speak in the background, say that local regulations forced the Fed a Make most of the underground expansionInstead of building the highest buildings, which have increased the cost.
Meanwhile, Kevin Warsh, a former Fed governor and a possible candidate to replace Powell as president when Powell’s mandate expires next year, recently said that this Fed has attracted greater control Due to its inability to keep prices under control.
“The current wounds of the Fed are largely self -inflicted,” he said in a speech During a conference of the International Monetary Fund At the end of April, in which he also whipped the Fed for participating in a world forum on climate change. “Strategic restoration is necessary To mitigate the losses of credibility, the changes of position and, above all, the worst economic results for our fellow citizens. “
PowellOn the other hand, He said last month that “Fed’s independence is very widely Included and supported in Washington, at Congress, where it really matters. “
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