Monetary policy
Customs brakes US Federal Reserve – Fed despite Trump
US President Trump wants low interest rates. Fed boss Powell wants to keep inflation in check – Trump’s tariffs are not exactly helpful. The FED therefore prefers to keep your feet still.
In view of President Donald Trump’s aggressive customs policy, the US Federal Reserve FED is waiting for itself and does not want to commit itself to raining interest. “We have to wait and see how the situation develops,” said Fed boss Jerome Powell when asked by a reporter whether the central bank should reduce interest this year.
“There are cases in which it would be appropriate to reduce interest rates this year. But there are also cases in which this would not be appropriate. And we just don’t know.” The FED is on a collision course with Trump, which vehemently demands interest rate cuts.
Probably no interest rate reduction in summer
The central bank of the world’s largest economy has again defied these calls at its current session. It left the key interest rate at a high level of 4.25 to 4.5 percent.
Powell named Trump’s tariffs and the associated uncertainty as the main reason for the hesitant procedure. The high penalty taxes could lead to an increase in inflation, slowing down economic growth and an increase in unemployment, he warned. Since took office, Trump has imposed high tariffs on goods from all over the world – and donated uncertainty with various U -Wenden.
“At the moment it looks like it is a fairly clear decision for us to wait and see,” said Powell. In March, the FED for 2025 predicted a key interest rate of 3.9 percent. This indicates two small interest steps this year. The next forecast comes in June.
Experts now assume that the Fed should touch the key interest rate at the earliest in autumn. Some see no movement at all this year. “We continue to assume that the FED will leave interest rates for the whole year,” writes Paul Ashworth, chief economist North America at Capital Economics.
Trump and Fed are crossed
The task of the Fed is to keep inflation in check. Since tariffs act like a kind of additional tax on imported goods, they drive up the prices. The FED strives for a 2 percent inflation rate. In March, US consumer prices rose by 2.4 percent in the year.
High interest rates are an instrument for rapid rising consumer prices. Because expensive loans dampen the demand, which ideally means that companies no longer increase their prices as much. In addition, higher interest rates set more incentive to save.
However, high -interest policy can slow down the economy. In the first quarter, the US economy lost a lot of driving and surprisingly shrank. For Trump, these were not good news – he rated the development as an aftermath of the economic policy of his predecessor Joe Biden. According to analysts, however, the decline is primarily due to a strong increase in imports, since companies tried to stock up on Trump’s expected tariffs with storage purchases.
Trump is an advocate of low interest rates. The Republican hopes that the stock markets will be supported, state financing over debts is cheaper and economic growth is boosted. Again and again he verbally attacks Fed boss Powell and asks the central bank to turn the interest screw – so far without success.
“A bend against the US president – especially without a crystal -clear economic indication in the direction of money -political relaxation – would damage the independence of the FED in the perception of many market actors,” said Elmar Völker, analyst at the LBBW according to the current meeting of the central bankers.
Powell: Trump’s demands have no influence on our work
When asked how Trump’s continuing demands influenced the work of the Fed, Powell replied: “This in no way affects our work.” The FED is doing what it always does – and to work for a “maximum employment and price stability for the benefit of the American people”.
Powell was even nominated by Trump in 2017 for his first term as Fed leader. But Trump’s enthusiasm for the lawyer, who made a career in the financial world, quickly subsided. The Republican has been attacking Powell publicly for years due to his point of view of hesitant interest reductions.
It is unlikely that Powell and Trump still find each other. It is considered excluded that the US President Powell nominates for another term. Powell’s term of office ends in 2026. In the meantime, Trump also brought into play to fire Powell. However, there are legal concerns – Trump took a distance from the idea.
At the press conference on the interest decision, Powell was extremely smoke -up on questions on this topic. When asked why he was not looking for a conversation with Trump, the 72-year-old replied that he had never asked for a meeting with a president. “And I can’t imagine that I do that.”
dpa
Source: Stern
