The President of the Federal Bank of USA (Fed) Jerome Powell He made it clear yesterday (7.5.25) that he would not rush to reduce borrowing costs until there was more certainty in the direction of commercial policy, which should come from the White House.
Powell (Fed) and his colleagues have consistently maintained interest rates, at their first meeting following US President Donald Trump’s sweeping announcements for duties last month, said the risks to see higher inflation and unemployment have increased.
This scenario would impose a difficult choice, Powell said, among the reduction of borrowing costs to support the labor market or maintaining a high level of prices in prices. And in the meantime, he let me mean that The uncertainty about the extent and scale of duties – and the outcome of the forthcoming trade talks – will keep policymakers waiting for the time being.
“In the absence of a decisive shift in US financial data, the FOMC seems to feel comfortable while staying indefinitely waiting,” said James Egelhof, head of BNP Paribas economist for the US, referring to the Federal Open Market Committee. “FOMC is awaiting the belief as to whether the next move will be a cut based on the economy to the recession or whether it will be a move to a more restrictive policy due to the consolidation of high inflation in the economy.”
The interest rates committee unanimously voted to maintain the federal capital report rate in a range of 4.25% to 4.5%, where it has been in December.
Trump announced a series of duties larger than expected on April 2, but then suspended some of them for 90 days. The burden on imports from China are now 145%. The on-again-off-ers character of the duties, coupled with the lack of clarity about where commercial policy will eventually settle, has launched a wave of uncertainty throughout the economy.
While contributions are still under negotiation, economists are widely awaiting that expansion duties will increase prices and burden growth.
Powell has been heavily criticized by Trump not to reduce interest rates. In his confrontation with reporters, the Fed president stressed that the White House is in a better position to resolve the growing risks and uncertainty and indeed appeared to move in that direction. American and Chinese officials will later meet in Switzerland this week to discuss duties.
“After all, this is what the administration must do. It is their own command, not ours, “Powell said. “It seems that we are entering a new phase where the government is starting talks with a number of our important commercial partners and this is able to substantially change the picture.”
Concerns about the recession have increased in the US and some businesses have said they are suspending investment decisions due to uncertainty. However, the labor market remains durable, with employers adding 177,000 jobs in April. Fed officials described the conditions in the labor market “fixed”, according to the announcement.
Powell – recognizing that the climate of consumers and businesses had darkened in the midst of duties on duties – said that the incomprehensible elements continue to give the image of a healthy economy. “I think in general, when we are watching the Fed, he has much less than his fellow.” Century Advisors. “The Fed is largely in the caprice of politicians coming out of the White House. It’s reactive. “
Economists say it will take time for the full result of new duties to the economy to work. So far, the impact mainly involves a sharp decline in climate and an increase in imports. The US economy shrunk early this year for the first time since 2022, but an indicator of the underlying demand remained stable.
Proposal contract markets show that investors are still awaiting about three interest rate cuts this year, with the chances of a decrease in July already around 85%. Most economists and investors do not expect that the Fed will reduce interest rates at its next June meeting.
“You’re not going to have data until June that really gives you a lot of information,” said Ellen Meade, a professor of Economic Research at Duke University and a former Special Adviser to the Fed Board of Directors. “The earliest you would really think about is July, but I honestly think it’s September and I’m not even convinced they will diminish.”