Money policy: Fed sezt at the first meeting after Trump’s start on zin break

The US Federal Reserve Fed does not touch the key interest rate in its first session since Donald Trump’s re-enactment into the White House. It is therefore still at a high level of 4.25 to 4.5 percent, as the Central Bank Council in Washington announced. Central bank money can be borrowed from this sentence.

The step was expected – he could lead the central bank to a collision course with Trump. It works regardless of the US government. But Trump is a clear advocate of a low interest rate policy. He communicates this with clear words.

Inflation is still “somewhat increased”, Fed boss Jerome Powell justified the decision for the interest break. “We know that too fast or too strong relaxation of the monetary political restrictions could impair progress in the fight against inflation,” he said.

Trump: I know me better than the Fed

In a speech at the World Economic Forum in Davos last week, Trump had clearly commented on interest on interest: “When oil prices decrease, I demand that interest rates are falling immediately. And they should also decrease all over the world.”

Trump later emphasized that he is better to be familiar with key interest rates than the Fed. “I think I will certainly know much better than the one who is primarily responsible for this decision,” said Trump, apparently alluding to Fed boss Powell. The latter now emphasized that he had no contact with Trump and did not want to comment on these statements.

Trump had repeatedly created with the Fed in his first term and criticized Powell violently – he had nominated him for the post himself. At that time, Trump reported that Powell was considered firing. However, this was rejected due to legal concerns. Powell’s term ends in 2026 – Then Trump can nominate a new Fed boss.

Trump had already explained that he would not nominate Powell again. Powell, on the other hand, made it clear that he would not be chased out of office by Trump. The 71-year-old had made a career in the financial world at the central bank before his time.

ECB should reduce interest in the euro area again

On Thursday, the European Central Bank (ECB) will decide on the further interest rate. It is expected that the euro currency keepers will reduce the key interest rates again. It would be the fifth interest rate in the euro area since mid -2024. This would support the ECB the weakening economy.

Inflation in the USA is persistent

The classic task of the Fed is to keep inflation in check. It strives for an inflation rate of 2 percent. In December, this attracted something in the United States: consumer prices increased by 2.9 percent compared to the same month of the previous year. This increased the third month in a row.

In the fight against the high inflation in the USA, the FED had strongly turned the interest screw and has in the meantime raised the interest to the highest level for more than 20 years. In September she initiated the turning point and lowered her key interest rate for the first time since Coronapandemia erupted.

This was followed by two more interest reductions – most recently in December by 0.25 percentage points, a small interest step. For this year, according to the current forecast on average, the central bank calculated with a guiding interest rate of 3.9 percent – in the forecast of September it was 3.4 percent.

The current forecast indicates two small interest reductions this year – and thus intended for a more careful procedure than before Trump’s election victory in November. The FED is usually covered with the topic, but the hesitant procedure is likely to be on Trump’s economic policy plans in addition to stubborn inflation. With a view to Trump’s plans, Powell now emphasized that you “wait patiently” and “don’t want to rush anything”.

Trump relies on tariffs and deportations

According to experts, these could lead to a higher inflation, which limits the scope of the Fed’s scope for interest rate cuts. Trump wants to introduce far -reaching tariffs – for example on products from Canada, Mexico and China. He also threatened the European Union.

High import duties are likely to switch to prices and thus consumers – this could heat up inflation again. Trump rejects these fears.

A mass deportation of migrants could also affect prices. Many people without valid residence documents are employed for low wages in the service and construction industry. If these workers fall away, they must be replaced. This could go hand in hand with wage increases to make these jobs more attractive. Rising salaries in turn usually lead to price increases.