The Federal Reserve held its clothing unchanged Wednesday Since it is waiting for additional information about how tariffs and other possible disorders will influence the economy this year.
The Fed’s political decision -makers signaled that they will reduce interest rates twice this year, even if they also project that the import duties of President Donald Trump will promote inflation higher. They also expect growth to slow down and that unemployment increases according to their information Last quarterly projections Published on Wednesday.
The Fed’s political decision -makers had reduced their rate three times at the end of last year, but have been in the queue since then. Inflation has cooled steadily since January, but the chairman of the Fed, Jerome Powell, said at a press conference that the tariffs will probably reverse this progress and increase inflation in the coming months. The Fed assumes that inflation will be temporary, but they want more data to be safe.
“Increases of tariffs this year are likely to increase prices and burden the economic activity,” said Powell. “This is something we know, we just don’t know how big the size is.”
Changes to the FED rate normally – Although not always – influence the credit costs for mortgages, car loans, credit cards and business loans.
So far, inflation has decreased further, while some cracks have occurred in the economy, especially in housing construction, in which increased loan costs slow sales and residential construction. The attitude has also slowed down. Such trends would usually cause the FED to reduce the Treiss rate, which is currently around 4.3%.
But Powell said that the economy is still in good condition and the Fed must take the potential for increasing prices into account shortly.
“You may see a very, very slow cooling on the job market,” but nothing that is worrying at this time, “he said.
“We have to look forward,” said Powell later. “We expect a meaningful amount of inflation in the coming months, and we have to take this into account.”
Powell also said that the Fed would learn much more in summer about how the tariffs will affect the economy. George Pearkes, the global macro strategist for the tailor -made investment group, said he interpreted it in such a way that the Fed only in September, at the earliest. The next meeting is in July.
“If we don’t see a really, really quick deterioration on the job market, we only see September and maybe not even,” he said.
The Wall Street investors are currently expecting the FED to be reduced in September Cme fedwatch.
According to the forecasts published on Wednesday, the Fed officials look at 3% from 2.1% according to their preferred measure according to their preferred measure. You also project that the unemployment rate will increase from currently 4.2% to 4.5%. The growth is expected to slow only 1.4% this year, compared to 2.5% in the previous year.
Claudia Sahm, chief economist at New Century Advisors and former FED economist, said that the forecasts show that political decision -makers expect inflation 2026 and 2027, although the tariffs only have a temporary effect. Without the duties, civil servants would soon lower interest rates, she said.
“The FED seems to be in agreement that this will be temporary, but they don’t have a lot of conviction yet,” she said.
So far, inflation has cooled down this year to only 2.1% in Aprilessentially back at the destination of the central bank of 2%. The core inflation, which excludes the fleeting categories of food and energy, remains by 2.5%.
Trump pointed out the mild inflation figures to argue that the FED should reduce the loan costs and repeatedly criticized Powell that she did not do so. On Wednesday he called Powell “stupid” and accused him of being “political” because he did not reduce the rates.
“So we have no inflation, we are only successful,” said Trump before the Fed announced its decision. “And I would like to see that interest rates are falling.”
Trump previously argued that an installment reduction would increase the economy. Now his focus has shifted to the Federal Government’s credit costs, which have shot higher since the pandemic, with the interest payments with an annual sentence of more than 1 trillion US dollar.
If you urge the Fed to reduce interest rates to save the government on its interest payments, alarms are usually raised under economists because it would endanger the Fed’s congress mandate to focus on stable prices and maximum employment.
One of Trump’s complaints is that the FED does not reduce interest rates, even if other central banks around the world have reduced their credit costs, including in Europe, Canada and Great Britain, the Bank of Japan kept its most important short -term interest rate at 0.5%unchanged after it was actually raised recently.
But the European Central Bank, the Bank of Canada and the Bank of England have reduced their interest rates this year because US tariffs weaken their economies. So far, the US economy has largely been solid and the unemployment rate low.
The Bank of England has reduced its interest rate Twice this year However, it is expected that it will remain unchanged at 4.25% if it hits on Thursday.
