The Federal Reserve (Fed) kept interest rates unchanged in the range of 4.25% to 4.50%, completely ignoring US President Donald Trump who is demanding immediate easing of monetary policy and interest rate cuts.<\/p>\n\n\n\n
As reported by the Monetary Policy Committee (FOMC), although fluctuations in exports continue to affect economic data, recent indicators suggest that economic activity growth in the US moderated in the first half of the year.<\/p>\n\n\n\n
The unemployment rate remains low and labor market conditions remain solid. However, inflation remains somewhat elevated.<\/p>\n\n\n\n
\u201cThe Committee seeks to achieve maximum employment and inflation at the rate of 2% over the long term.<\/p>\n\n\n\n
Uncertainty about the economic outlook remains elevated<\/strong><\/p>\n\n\n\n In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue to reduce its holdings of Treasury securities, agency debt, and securitized agency mortgage loans. The Committee is firmly committed to supporting maximum employment and returning inflation to its 2 percent objective.<\/p>\n\n\n\n The Committee stands ready to adjust the stance of monetary policy if risks to its objectives arise. The Committee’s assessments will take into account a wide range of information, including indications of labor market conditions, inflationary pressures and inflation expectations, and financial and international developments,” the statement said.<\/p>\n\n\n\n Powell (Fed) Does Not Signal Rate Cuts – Warns of Inflation, Housing Market<\/strong><\/p>\n\n\n\n The chairman of the Federal Reserve stopped short of announcing a rate cut, in the wake of the decision to maintain the interest rate range at 4.25% to 4.50%.<\/p>\n\n\n\n \u201cMonetary policy is currently moderately accommodative,\u201d Jerome Powell said at a press conference, stressing that the Fed has not yet made any decisions ahead of its September meeting. He described the current phase as \u201cearly\u201d in terms of assessing the impact of tariffs and other changes in government policies.<\/p>\n\n\n\n Although inflation remains slightly above target, with estimates placing the PCE index at 2.5% and the core index at 2.7% year-on-year through June, the official stressed that longer-term expectations remain in line with the 2% target.<\/p>\n\n\n\n Regarding the labor market, he acknowledged that there are downside risks, although he stressed that most indicators show that employment remains near peak levels. However, he noted that the pace of economic growth has slowed, which is mainly attributed to the decline in consumer spending.<\/p>\n\n\n\n Special mention was also made of the housing market, which the Fed chairman described as weak, while regarding tariffs, he emphasized that the effects are starting to be felt in some consumer prices, but most estimates of the overall tariff impact have not changed significantly.<\/p>\n\n\n\n In closing, Mr. Powell reiterated that despite uncertainty in many areas, the overall picture of the US economy remains stable.<\/p>\n\n\n\n However, he avoided giving a clear signal for future easing of monetary policy, choosing to emphasize the need for flexibility and assessment of developments before making further decisions.<\/p>\n\n\n\n Divided\u2026 and under pressure<\/strong><\/p>\n\n\n\n U.S. Federal Reserve officials acknowledge that they will eventually need to cut interest rates. But they are not ready to do so anytime soon.<\/p>\n\n\n\n The concern that divides them is the kind of evidence that needs to be there to justify a cut, and the risk that expectations for more clarity will prove to be wrong later.<\/p>\n\n\n\n The Fed appeared united when it decided to freeze interest rate cuts earlier this year, fearing that tariffs imposed by Donald Trump would reignite inflation.<\/p>\n\n\n\n But with inflationary pressures from tariffs proving milder than initially feared and signs of a slowdown in the labor market mounting, the Fed\u2019s monetary policy committee now appears divided into three camps.<\/p>\n\n\n\n The heated internal debate coincides with mounting political pressure. Donald Trump continues to push for interest rate cuts and recently toured renovation projects at the Fed building \u2014 a move that White House advisers have called \u201cwasteful,\u201d ratcheting up pressure on Fed Chairman Jerome Powell.<\/p>\n\n\n\n While Trump may eventually get his way, it won\u2019t happen at this week\u2019s meeting. Attention now turns to Powell\u2019s remarks at a news conference on Wednesday, July 30, and to what other Fed officials will say about a rate cut at the September meeting.<\/p>\n\n\n\n San Francisco Fed President Mary Daly echoed the concerns of the cautious majority on the committee, arguing that uncertainty about the path of inflation makes a rate cut premature.<\/p>\n\n\n\n As he told a conference in Idaho, \u201cyou can\u2019t wait forever\u201d when interest rates are at levels that slow economic activity.<\/p>\n\n\n\n The group is open to a future rate cut, possibly later this year, but is first waiting for two more months of labor market and inflation data. The goal is to see whether the costs of tariffs are ultimately passed on to consumers and whether economic activity remains subdued.<\/p>\n\n\n\n According to Daly, early data from the recent tariffs show that the costs are being shared among importers, suppliers and retailers, limiting the immediate impact on inflation.<\/p>\n\n\n\n On the other hand, two members of the Fed Board of Governors, Christopher Waller and Michelle Bowman, appear ready to diverge and support an immediate rate cut. This is a particularly significant development, as it has been five years since there has been more than one disagreement at a monetary policy meeting.<\/p>\n\n\n\n Waller, in a recent speech in New York, argued that the June unemployment rate drop masks weakness in private-sector hiring.<\/p>\n\n\n\n \u201cIf we\u2019re talking about cutting rates in September, why not do it now?\u201d he asked, suggesting that a delay could worsen the labor market.<\/p>\n\n\n\n But there is a third group within the Fed that insists on seeing clear signs of an economic slowdown before agreeing to another cut. These officials fear that prices could rise in the coming months as tariffs and price adjustments to businesses are not yet fully reflected.<\/p>\n\n\n\n Atlanta Fed President Raphael Bostic warned that the ongoing public debate about inflation could change people\u2019s inflation expectations and turn temporary price increases \u2013 such as those from tariffs \u2013 into more permanent ones.<\/p>\n\n\n\n He said, \u201calthough inflation has receded from its 2021-22 highs, concern about prices continues to dominate the public discourse.\u201d<\/p>\n\n\n\n As former Fed senior adviser William English explains, any decision\u2014whether made now or in the fall\u2014is unlikely to have an immediate impact on inflation or unemployment. That means the real challenge for the Fed is one of communication and politics.<\/p>\n\n\n\n Officials are being asked to weigh the risk of a premature cut, which could reignite inflation, against the risk of maintaining an excessively \u201ctight\u201d monetary policy and hurting the economy.<\/p>\n\n\n\n As former Dallas Fed President Robert Kaplan famously put it, \u201cif you delay one or two meetings, that\u2019s easy to fix. But if you make a mistake that takes two years to fix, then you\u2019re in trouble.\u201d<\/p>\n\n\n\n Kaplan likened the Fed to a supertanker that doesn\u2019t turn easily, saying the Fed\u2019s gradual approach reflects a need for stability and predictability.<\/p>\n\n\n\n However, he noted that if he were still in his position, “I would be preparing now to start the turn” and for the Fed to be ready to cut interest rates “with confidence in September,” if necessary. The Federal Reserve (Fed) kept interest rates unchanged in the range of 4.25% to 4.50%, completely ignoring US President Donald Trump who is demanding…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[390,819],"tags":[655,61,6860,783,897,70],"class_list":["post-25400","post","type-post","status-publish","format-standard","hentry","category-politics","category-usa","tag-donald-trump","tag-fed","tag-federal-reserve","tag-jerome-powell","tag-monetary-policy","tag-usa"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/25400","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=25400"}],"version-history":[{"count":2,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/25400\/revisions"}],"predecessor-version":[{"id":25403,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/25400\/revisions\/25403"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=25400"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=25400"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=25400"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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