It will be a big surprise if the American federal reserve decides to download interest rates this Wednesday. For analysts, the important thing will come between the Central Bank’s statement or Jerome Powell press conference, which remains under pressure from the Trump administration
Day by surprise… or not so much. In the space of a month, since the last US Federal Reserve meeting, US President Donald Trump seemed to moderate the threat of removing the current Central Bank President Jerome Powell, so he considers his own. But it has not reduced the pressures for Powell to download them now.
At the end of last week, five days from Wednesday’s meeting that the first three months of his second term were “a transition phase that is just starting” and that “consumers have been waiting for lower prices for years”-“Without inflation, the Fed should lower their rates!” Wrote the president in his social trath.
However, it seems that it will not be today that interest rates will lower in the United States-among other reasons for the “great dilemma the Fed faces” at this time, a dilemma that economist João Costa Pinto, former deputy governor of Banco de Portugal, last month.
“Powell knows that it cannot be seen as losing autonomy against Trump administration, because if this happens the global impact on markets is extremely complex, as the central elements for international financial markets, currently organized around the US dollar, is confidence in the Fed to conduct an autonomous monetary policy.”
The consensus among analysts is that a change in interest rates today would be a surprise for markets, and interest rates are expected to remain unchanged in the interval between 4.25% and 4.5% for the high economic uncertainty of the moment-above all considering that the impact of the tariff war began, and, however, partially paused by Trump not yet reflected in the data.
Whatever the decision, with or without surprises, will always be seen as politics. “Whatever [os membros da Fed] Do it will be politically interpreted, ”BNY Investments chief economist, who worked more than two decades in the US Central Bank.“ If the meeting comes an unchanged position, then the headline will be: ‘Fed ignores the president’. And if, surprisingly, policy is flexible, the headline will be: ‘Fed bends to the president’. ”
Above all, and confirming that interest rates will remain unchanged, economists and markets will be aware of the lines of the Powell Fed and Press Conference at the end of Wednesday’s meeting in search of evidence about what the Central Bank will decide on its next meeting, scheduled for June 18.
There is a large expectation of a reduction in interest rates in five weeks, powered by the fact that until this meeting the US Statistics Institute discloses data on price evolution-next week, May 13, the inflation data related to April, followed by May data, which will be published on June 11, a week before the next Fed meeting.
The latest known data on March, report that the inflation rate has been slowing down and is in the 2.4%, still above 2% intended, but far from the maximum peak of 9.1% registered in mid-2022. But the perspectives of economic growth, inflation and employment continue to be uncertain-especially considering that GDP contraction in the first quarter of the first quarter Year was artificial, in the context of the tariffs imposed by the Trump administration to more than 150 countries.
“The first quarter GDP registered a contraction, but this was due to an increase in imports, as companies anticipated purchases of goods manufactured abroad to avoid customs rates,” says the Dutch bank. “However, we are now watching a sharp drop in the new orders of goods, with the sending of goods abroad to slow down.”
A month after the Organization for Economic Cooperation and Development (OECD) has reviewed the projection for the US economy, which is expected to slow down to 2.2% this year before falling to 1.6% by 2026, there is fears that the reduction in interest rates to compensate for potential economic weaknesses resulting from the tariff war can feed and prolong inflation.
The Fed predicts that tariffs should lead to increase either inflation and unemployment, although it is not known to what a degree or how long, and the new central bank quarterous forecasts will only be released in June. In his publication on Friday, Trump defended the tariffs again, thanks to which he said, “thousands of millions of dollars are entering the US economy.
The regulator, however, has no certainty. As I wrote a few days ago Michael Feroli, JP Morgan’s chief economist for the US: “We hope that President Powell’s main press conference is that the committee [federal de mercado aberto] It is well positioned to wait for more clarity before making any change in monetary policy. ”
