But for months, as we know, Powell, whose mandate is scheduled until May 2026, has made the big back, hosting Trump’s attacks which agitated the threat of ejecting it from his post, treating him to the passage of” jerk” or “looser”. Barely a few days ago, the American president, visiting the offices of the Central Bank US, had put on the owner of the Fed a final stroke of pressure, accusing him the explosion of the budgets of the renovation site of the monetary institution in Washington.
“A more restrictive posture than necessary”
But therefore this Wednesday and after a two -day meeting, the Fed opted for the status quo, maintaining its guiding rates in a range between 4.25 % and 4.50 %, rates that have been at this level since December. “”Ironically, to defend its independence, the Fed could adopt a more restrictive posture than necessary, even if it means delaying relaxation which would be otherwise justified and to amplify economic disorders “, Consider Gregory Daco, economist at EY, quoted by AFP.
I think that having an independent central bank is an arrangement that has served the general interest well and that, as long as it is the case, it is something that must continue and be respected. “
As a reminder, in the mandate of the Fed obviously appears in gold letters the fight against inflation. This remained contained 2.3 % on an annual basis but it is still beyond the target of 2 % fixed by the Fed. Let us specify updated figures are expected later in the week.
The cloth burns (still) between Trump and Powell: the tension was palpable during the meeting of the American president with the boss of the Fed
Jerome Powell therefore preferred to play the card of prudence. “”There are many remaining, a lot of uncertainties around the repercussions of new customs duties. For the moment, we are well placed to learn more about the likely evolution of the economy […] Before adjusting our policy “, explained the boss of the Fed, at a press conference. After the announcement of a rate of 15 % hitting European products, Trump still announced customs duties on Wednesday 25 % targeting India and even 50 % for Brazil. Powell therefore intends to mean Trump that he will remain master of the calendar. And Powell took the opportunity to defend the independence of his institution: “I think that having an independent central bank is an arrangement that has served the general interest well and that, as long as it is the case, it is something that must continue and be respected “, he said. And to specify that this independence is “This makes it possible to make difficult decisions by being concentrated on the data and the evolution of the risk balance “.
Price upwards?
The fear is obviously that this customs policy does not push prices upwards in the coming months for American consumers, dependent on imports for many products.
After constraining the European Union to conclude a trade agreement, Donald Trump shouts victory but it could cost him dearly
On the growth front, the latest figures are, however, encouraging. After a difficult first quarter, arithmetically due to a surge in pre-right customs imports, American economic activity experienced greater growth in the second quarter expectations, at 3 % in annualized pace. But in its press release, the Fed notices that American growth has “slowed down in the first half “ of this year but that the labor market remains “solid”with an unemployment rate “bas”.
Two governors vote against
However, this meeting could be the last of this monetary status quo. Internally within the Fed, tensions now appear in broad daylight. Within the Governors’ Council, Governor Christopher Waller said he wanted a rate drop of 0.25 % from this week’s meeting. Without success therefore. Her colleague Michelle Bowman (Editor’s note: also vice-president of the Fed responsible for banking regulation) also said that she was leaning in this direction, even if less closely. These two governors, which are said to be close to Trump, have also marked their opposition finally to the decision to maintain the rates in the state, which is rather rare at Fed where custom is to make decisions unanimous. In reality, it is necessary to go back to 1993 so that two governors openly oppose a decision by the Fed.
The pressure will therefore be strong at the start of the school year, in September, so that the Fed triggers the drop in rates. And Trump will obviously put all his weight there …
