The suggestion of Trump to lower the rate from the Current range of 4.25% -4.50% to just 1% Do not be conditioned with the reality of the US economy, which is Far from the inflation target of 2% per year and a labor market that It still does not show clear signs of contraction.
Without change expectations
In one of your latest reports, personal porffolio investors (PPI) commented that “The market expects on Wednesday to maintain the rank of rates without changes “. And they deepened: “The implicit probability of two cuts in the remainder of the year fell from 91% at the end of June to 61%. Now the market assigns 62% of chances to the first cut arrives only at the September meeting “.
Similarly, in Outlier It stressed that “Futures of rates are aligned” with the expectations of the Fed for both 2025 and 2026. “This is, they expect two 25 -point cuts in the remainder of the present (in September and in December) and two cuts more than 25 points throughout 2026,” they detailed.
What will the market pay attention
“All the attention will be put in the ‘wording’,” they said, that is, at the subsequent press conference, “since the market discounts that there will be no changes in the rate” and added that “It will also be important to observe if there is any dissent within the organism or all alignedgiven Trump’s strong and sustained pressure on Powell. “
On that point, the focus will be put on two officials appointed by Trump in the Board of Governors of the Fed and that support a slight cut of the rate: the governor Christopher Waller and the supervision vice president Michelle Bowman.
Trump’s pressures to Powell
Trumpwho campaigned promising to lower life costsrepeatedly insisted that inflation is not a risk and systematically criticized Powell For, in his vision, force the government to pay more to finance their deficits and raise the cost of mortgage rates.
The pressure campaign seemed to culminate last week when administration criticism to a renewal project of the Fed building They took the American president to visit the site to see it by itself.
The visit seemed to reduce the risks that Trump dismisses Powell for the project, although the demands for feature cuts are maintained. While, Powell said he intends to serve as head of the Fed until his mandate expires in May 2026.
Source: Ambito
