Jerome Powell isn’t rushing to lower rates, even if Trump is rushing to fire him
Washington CNN President Donald Trump is running out of patience He wants lower interest rates a key part of his economic agenda The only predicament America s rate-setters don t statement to him Trump over the past week has ripped into Federal Reserve Chair Jerome Powell for not lowering borrowing costs threatening to fire him from what is an independent regime agency On Monday Trump renewed his society pressure campaign against Powell calling him a major loser But Trump s demands stand in stark contrast with the Fed s data-driven approach Not only is inflation still higher than Fed bureaucrats want but Trump s massive plan shifts threaten to send prices even higher The risks to inflation are more elevated than they were a year ago so the consequence of that is we might have to hold approach tighter for longer than we had thought San Francisco Fed President Mary Daly noted Friday at an event hosted by the University of California Berkeley The Fed under Powell s leadership has so far succeeded in tamping down the fastest inflation in more than years without a recession an exceptionally rare feat known as a soft landing Even Republicans such as Sen John Kennedy of Louisiana have praised the Fed s staunch commitment to information In fresh citizens speeches several Fed representatives have agreed that they can be victim before introducing a rate cut Inflation is still above the Fed s target and the job area remains in good shape so there isn t a convincing affair for the Fed to cut rates Trump s broad and high tariffs have also injected uncertainty into the economic system Forecasters say America could be on a path toward significantly weaker development and faster inflation a toxic combination known as stagflation Boston Fed President Susan Collins also echoed that sentiment of late saying that I see monetary approach as well positioned to address a wide range of prospective economic outcomes in this highly uncertain milieu Translation Interest rates can easily change in either direction so it s best to stand pat especially at such an uncertain moment until the economic details says otherwise More work to do When the commercial sector is in trouble and unemployment starts to ratchet higher the Fed typically moves in to stop the bleeding by cutting rates But there isn t material showing economic instability or high unemployment The Fed s preferred inflation measure the personal consumption expenditures price index has come down substantially since reaching a four-decade peak in June But it was still at an annual rate of in February The Fed s target is The financial sector also remains on solid footing Unemployment remains low employers continue to add jobs at a solid pace and consumer spending which powers two-thirds of the US business activity has slowed but it hasn t fallen off a cliff just yet The US financial system is continuing to expand but the pace of advancement appears to have moderated St Louis Fed President Alberto Musalem revealed on April at an event in Hot Springs Arkansas There is still more work to do to bring inflation back down to our target The Fed operates independently from the White House which means Powell and other Fed functionaries can set interest rates based on what they think is best rather than on short-term political considerations That independence can be deeply reassuring to investors at times of heightened uncertainty like now Fed independence is more essential than ever at a time when there is danger to underlying inflation and inflation expectations from Trump tariff inflation analysts at Evercore ISI wrote in an April analyst note And while Trump wants interest rate cuts Fed officers have signaled they are fine at their current rate The stance of monetary guidelines is well positioned Dallas Fed President Lorie Logan noted at an event in Dallas earlier this month
