Challenged by Trump, Fed maintains rates and warns of inflationary risk

The (US Central Bank) held on Wednesday (7) his interest rates and warned of higher risks that inflation and unemployment escape their goals, in an apparent reference to the fares imposed by the president. The Central Bank leaders unanimously voted for the maintenance of the reference rate between 4.25% and 4.50%, the Fed said in a statement.

“Uncertainty about economic perspectives has increased,” added the agency, who considers that the risks of a higher and higher inflation also “increased.” Although an increase in imports has weighed on GDP in the first quarter, “recent indicators suggest that economic activity continued to advance at a sustained pace.”

The Central Bank concluded on Wednesday two days of meeting. Their leaders made it clear that they wanted to wait to assess the impact of President Trump’s decisions on the US economy before making any precipitated decision. Markets expected the Fed to maintain rates at the same levels established in December, with no change.

Since the last Fed meeting in March, Trump has caused a real economic earthquake, with massive tariffs on products imported by the United States. Since then, he has made several concessions and flexibility and promised agreements with the country’s business partners. However, no agreement has been announced so far.

Trade exchanges with China are being particularly affected. Over the weekend, Chinese and American authorities will meet in Switzerland to launch the foundations of a negotiation.

Official indicators in the United States continue at positive levels: 4.2% unemployment in April and 2.3% inflation in 12 months to March – above, but still close to the 2% of the Fed. Meanwhile, the first trimester GDP had a 0.3% contraction in the annual projection (the projection in 12 months if the conditions remain at the time of measurement).

*With information from AFP
Posted by Carolina Ferreira