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Kathmandu. The US Federal Reserve has decided to keep interest rates steady after three consecutive interest rate cuts. The Fed’s decision was made public despite pressure from President Donald Trump.
Analysts expect the Federal Reserve to hold off on adjusting rates this week as it waits to see what policies the new Trump administration will adopt and how they might affect the US economy.
“I think the Fed will stay on its toes,” Mark Zandi, chief economist at Moody’s Analytics, told AFP. “The Fed will be hesitant to act until there is some clarity about the Trump administration’s economic policies,” he said. The US central bank has a dual mandate from Congress to tackle both inflation and unemployment. It can affect borrowing costs for consumers and businesses, primarily by raising or lowering the Fed’s key short-term lending rate.
The U.S. economy is doing very well, with strong growth, a more or less healthy labor market, and relatively low inflation that is still above the Fed’s long-term target of 2 percent.
The Federal Open Market Committee (FOMC) voted to cut its key lending rate by a full percentage point between September and December 2024, to a range of 4.25 to 4.50 percent. According to data from CME Group, traders expect the Fed to remain on hold this month, and give it a roughly 70 percent chance of extending its hold at its next meeting in March. Since returning to power on January 20, Trump has seemingly revived his threats to impose sweeping tariffs on U.S. trading partners by the end of this week and deport millions of undocumented workers.
He has also said he wants to extend the tax cuts and eliminate unnecessary delays in energy production. Last week, Trump renewed his criticism of Jerome Powell, the chairman of the Federal Reserve and the U.S. central bank he appointed in his first term.
“I will demand an immediate cut in interest rates,” he said, adding that “if the Fed does not implement policies that address my views, there will be a ‘strong response.’” “I think I know interest rates much better than they do, and I certainly know them much better than the person who is primarily responsible for making that decision,” he said. Most economists expect Trump’s tax and immigration policies to be at least mildly inflationary, which will raise the cost of goods that consumers face.
“I think the policies are definitely inflationary, it’s just a question of the degree,” said Zandi of Moody’s Analytics. “A big part of the Fed’s job of properly managing monetary policy is watching what lawmakers are doing and if they can’t get a decision on what they’re doing, then it can lead to adjustments to higher or lower rates,” he said. Yes.”
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