Despite Trump Pressure, Feds to Keep Rates Steady!

The US Central Bank on Wednesday shared that it will keep the federal funds rate steady. Federal Reserve Chair Jerome Powell’s comments after the decision lowered confidence that the rates will be down even in September, a period when the Federal Reserve usually cuts its rates. This can create a quarrel between the Federal Reserve and the Trump administration as the latter has demanded immediate and steep relief in the interest rates.

Powell said that the feds are focused on lowering inflation in the country and not on government borrowing or home mortgages, which the Trump administration wants lowered. He added that the risk of rising prices, courtesy of the administration’s trade and other policies, is too high for the feds to lower the rates right now. Powell added that no rate cuts are scheduled until more information is collected.

Although two months till September are enough to collect the required data, Powell said that the Central is still in the process of understanding the long-term implications of Trump’s import taxes and other policy changes. He said, “You have to think of this as still quite early days. There's quite a lot of data coming in before the next meeting. Will it be dispositive?... It is really hard to say.”

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Many economists shared their views on the Fed's decision to keep interest rates steady. Bill Adams, Chief Economist of Comerica Bank, said that Powell “made clear that he thinks the Fed has room to hold the fed funds rate steady for a period of time and wait and see how much tariffs affect inflation.” He added, “If the unemployment rate holds steady and tariffs push up inflation, it will be hard to justify a rate cut in the next few months.”

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