Powell remains steadfast: Fed holds interest despite Trump printing!

Powell remains steadfast: Fed holds interest despite Trump printing!

In a current time full of economic turbulence, Jerome Powell, the President of the Federal Reserve (FED), has made it clear that there is no urgent need to change monetary policy quickly. He expressed this during a hearing in front of the Commission for Financial Services in the US House of Representatives. Powell emphasized that the Fed would wait and see how the economic framework develops before an adaptation of the interest is considered. His statements have disappointed critics, especially President Donald Trump, who would like a rapid reduction in interest. At the moment the key interest rate of the Fed is between 4.25 and 4.5 %.

As far as the financial framework is concerned, the Fed puts the risks in the foreground that can arise from new tariffs and volatile oil prices. While Powell faces the challenges of inflation management, the political landscape is tense. Trump and some Republicans close to the congregation are dissatisfied with the Fed's politics and demand an interest rate reduction by two to three percentage points. The President expressed that the high interest rates cost the USA billions and repeatedly expressed his dissatisfaction with Powell, even gave him the nickname "M. Trop Tard", because of the late action of the central bank.

turbulent times for the fed

The differences within the Fed itself are also noticeable. While some members, such as governor Christopher Waller and Vice President Michelle Bowman, bring an interest in the game to keep inflation under control, there are also warnings that such a reduction in interest could be risky. Because lower interest rates could increase the risk of uncontrolled inflation in the long term while boosting the economy.

The larger picture is complicated, however: geopolitical tensions, especially the conflict between Israel and Iran, throw their shadows on the markets and could have a negative impact on oil prices, which is not insignificant in the context of inflation. According to the forecasts of Oxford Economics, oil prices are likely to fall unless there are military conflicts that affect the energy infrastructure.

a balancing act in uncertain times

with an unemployment rate of 4.2 %, which is historically low, and an inflation that is slightly above the target of 2 % of the Fed at 2.3 %, Powell runs away. The report on the consumer mood in June already shows a decline in the consumer climate, which indicates a possible uncertainty among the population, triggered by inflation. This mix of economic and political factors presents Powell the challenge of protecting the independent role of the Fed while he has to try to stabilize the economic framework.

In the end, the question remains how long the Fed can last this balance. Trump has indicated that he is not planning to release Powell, which could keep the tensions at a certain level. Nevertheless, the relationship between the Fed and the White House is tense and could be exposed to further loads in the coming weeks. The adherence to the independence of the Fed, as is said to be from Powell, will be crucial to give the credibility of the central bank and its handling of inflation and interest policy a solid basis.