- President Donald Trump wants federal reserve to reduce interest rates such as economic downturn and increase inflation from tariffs. However, the ultimate uncertainty is to make it difficult for the Fed to finish their current reduction structure.
President Donald Trump and Federal Conservation Chairman Jerome Powell are bad.
On Thursday Trump again Called on a fedAnd especially powell, reducing interest rates. Just one day earlier Powell was emphasized the fed views That the relative power of the economy meant it should not rush to make a decision.
“At this time, we are good to wait for more transparency before we consider any correction of our policy position,” Powell said on Wednesday.
Powell's cautionary approach persuaded the President. In a social media post early on Thursday morning, Trump called Powell's “aggressive” assessment and accused him of being “too late and wrong.”
Trump wants low interest rates to reduce the inevitable economic decline when his tax policies increase consumers' costs and international trade. Powell, at the same time, He doesn't want to Reducing rates too early because he is afraid of inflation will go back. Powell is also cautious because he enters an unlocked economy because Trump's tax policy has never been made that the results are unpredictable.
The question of what to do with interest comes against the unique economic situation. Fed has made significant progress on reducing inflation from June 2022 of 9%. This was very successful without Increase the unemployment rate. As of the March inflation was 2.4%.
While the price is stabilized and the labor market remains powerful, the economy (and markets) was sent for violence and sudden shock of Trump's tax policies. Not only unlike any other modern business policy, but they also continued to change regularly – sometimes even the same day.
All that did to the point of uncertainty that investors found it difficult to get stomach. Marketing went up, the prospects for inflammation increased, and the impulse set for the company and consumers. None of this is good for the economy that was previously shaking well.
White House against Fed
Now Trump wants Powell to reduce the rates to change those effects.
“Perhaps Trump believes that low levels would help the economy and that they could conflict with any adverse effects from the ongoing trade war,” Francesco Bianchi, chairman of the economy department at Johns Hopkins University.
In essence, Trump wants low inflation rates, which is expected to decrease significantly because of his tariffs. Wednesday Powell He said The fed forecast for the American economy saw “slow growth” for next year. Some of the Wall Street Banks, as Morgan StanleyAlso Cut Their estimates of the American GDP.
But Trump's measures have made little reduced bond levels. “The White House actions have made it difficult for the Fed to reduce the rates,” said Brett House, professor of economics at Columbia Business School.
Many of the expected effects from tariffs can result in high inflation, which usually requires Hikes levelsNot reduced. Taxes would increase the price for business in any area or product they buy from a foreign vendor. The sellers would pass those to consumers, who would see the high price of the stickers. If inflation had emerged, the Fed would have no choice but to increase the rates, contrary to what Trump wants.
Fed began its cycle of reducing rate in September 2024, with a jumbo cut 50 basic tips. Then it cut twice at the end of last year. These cuts brought the target level of federal funding from 5.25% and 5.5% to their current levels of 4.25% to 4.5%. In 2025, the Fed has not yet reduced the standards. Fed was already in the Holding structure On the reduction of the scale, which will only continue when the economic image becomes clear.
“What happened in the past several weeks has put more preference to hold,” said Jose Torre, a senior economist in the interactive brokers. “So it has strengthened the case of holding.”
When asked why the Fed started the fiercest year's levels, Torres was not balanced: “Very simple,” he said. “They started very fast.”
After the interest rate is reduced inflation starts to start again. In September 2024 the PCE index, which is a fed inflation measure, was 2.1% by February 2025 was up to 2.8%. Wall Street Expected Between two and three interest rates in the second half of the year. The risk of reducing the rates recently is that they are sending the shooting price back, which is already a practical guarantee due to ongoing tariffs.
“The risk of reducing rates recently is that inflation is back and markets are losing confidence that Fed is dedicated to low -end inflation,” Bianchi said.
When is it absolutely cutting the standards though it is an act of delicate balancing. Go too early and inflation is increasing, go late and the economy can end. Delay means not providing enough economic stimulus, which goes down the economy. However inflation can be a more welcome problem than an alternative from economic decline, according to Torres.
“One important part here is that in the main branch, the problem of inflammation is better than the labor problem,” Tress said. “So policy headlines can cause labor weaknesses. It is even worse that Americans complain that they have lost their jobs and cannot find a job, then Americans complain that prices are going up.”
This story was previously shown Bahati.com
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