At the most politically charged meeting of which there is memory, the Federal Reserve complied with the planned script and agreed a cut of 0.25 points, the first since December and the first also since it is in the White House Donald Trump, a president who has broken all the rules of the decorum with his pressures to Jerome Powell. These have included insults and threats of dismissal; All in order to make its desires to lower the types and, thus, mitigate the blow of the aggressive commercial policy of Washington. meeting
The American Central Bank also announced that it foresees, in line with the forecasts of the futures markets, two other cuts of 0.25 points until the end of the year. He does so in the face of the weakness of the labor market, which Powell warned, contributes the fall in immigration caused by the aggressive policies of the Trump administration, and despite the recent increase in inflation, which the Fed is confident that it is transient.
For this reason, the spotlights of the news, which pointed with the greatest force of which there is memory in the history of the regulatory body, were not in the possibility or not of the cut, but in the forecasts of what will come later (the Central Bank) in which perhaps it will be surely questioned by independence, questioned Trump, of the agency.
Also, in the behavior of four of the seven governors of the Board of the US Central Bank: Stephen Miran, Trump’s Economic Guru appointed in August by the President to press from within in view of the fact that the pushes on the outside have not given him the desired fruits; Lisa Cook, in the spotlight of the courts; And two appointments of Trump, Michelle Bowman and Chris Waller, who at the last meeting of the Fed disagreed from Powell – in an unprecedented gesture for three decades – and voted for a cut of 0.25, in front of the position of “waiting and seeing” of the president of the Central Bank in a vote that left the price of money as it was for the fifth time.
Well, on his second day in the office, when the common workers is still getting to the idea of where the coffee machine is, whose appointment was approved in extremis by the Senate on Sunday, began strongly and voted for a cut of 50 basic points, in the line of Trump’s wishes, which has come to say that he would see with good eyes a fall of 300 points. As for Cook, whose participation in the meeting was in the hands of an Appeals Court, which decided in his favor one day before, Bowman and Waller, who has sounded as a candidate to replace Powell when his mandate expires in May, the three voted with the rest of the governors for a cut of 25 points.
Cooling signs
On the purely economic level, the Fed announcement also arrives at an extraordinarily delicate time. With upward inflation (it grew 0.4% to 2.9% in August) cooling signs, Powell is in a difficult balance. To contain inflation, the types should be raised. To improve employment, cut them. So the Fed, in a volatile economic climate, in which the effects of Trump tariffs are not yet clear, and with some economists warning about the risk of the United States between recession, you have to measure your next steps very well.
In his subsequent appearance before the press, Powell – who did not want to assess Miran’s controversial appointment and if he puts the independence of the organism he directs at risk; “We are still committed to her,” he said: “The marked deceleration of both the supply and the demand for workers is unusual. In this less dynamic and somewhat weaker labor market, the downward risks for employment seem to have increased.”
He also recalled on several occasions that he considers that unemployment is still “relatively low.” “What is happening with the labor market has more to do with the [caída de la] Immigration that with tariffs, ”he warned. That fall is due to Trump’s aggressive policies on the border and the persecution of irregular in US cities.
“There is very little or no growth in the supply of workers and, at the same time, the demand for workers has decreased dramatically, to the point that we observe what I have called a curious balance,” Powell said. “Normally, when we say there is balance, it sounds good. But in this case, the balance is because both demand and supply have decreased dramatically, and now the demand is further reduced because we see an increase in the unemployment rate.”
The president of the Fed, who was “strongly committed” to not losing the desired horizon of 2%inflation, also asked about Trump’s decisions, who was the president who appointed him for the position. And insisted that “changes in government policies continue to evolve and their effects on the economy remain uncertain.” “The increase in tariffs has promoted price increase in some categories of goods, but its general effect on economic activity and inflation is still to be seen,” he argued.
He also avoided the melee with Treasury secretary, Scott Besent, who requested an independent review of Fed’s work. “Certainly, we are open to always try to improve,” Powell replied, but did not want to “comment” that statement “or any other” of a politician.
To add elements to that uncertainty, there is more elaborate consumer confidence has fallen to its lowest level since May, although the evolution of August retail sales has been better than expected and gives rise to consider that the US economy remains strong.
In this panorama, the double objective of the Fed, contain prices and encourage employment, is added with more urgency of the usual one third: the search for a neutral interest rate, which neither impulse or stop the economy. How can the impertérrito Powell get that goal, who promised on Tuesday “work without distractions”, in the middle of the pressure and noise to which Trump is almost every day with his insults and motes (he only refers to him as “The too late”) It is one of those difficult questions that resonates strongly these days in Washington. Powell insisted on Wednesday that he does not know the resolution to that enigma, and that he is still installed in the idea that we must go “meeting to meeting”. Before the end of his mandate, he has another five at the head of the Central Bank. And everything indicates that they will be as often with magnifying glass as this week.
