Washington: The American Federal Reserve has held its unchanged reference interest rate, resistant to President Donald Trump’s pressure to implement other reductions in his first political decision since his return to the White House.
Political decision -makers voted unanimously to maintain the Fed’s reference loan rate between 4.25% and 4.50%, the FED announced in a press release.
The decision marked a break following three consecutive rate reductions which lowered the key loan rate of the Fed from a complete percentage point.
“The unemployment rate has” stabilized at a low level in recent months, and labor market conditions remain solid, “said the Fed.
He added that inflation “remains somewhat high”, while removing a reference in declarations prior to inflation which increases towards the long -term lens of the bank by 2%.
The American central bank has a double mandate of the congress to act independently to combat inflation and unemployment.
It mainly does so by increasing or lowering its key short -term loan rate, which influences borrowing costs for consumers and businesses.
Most analysts agree that the American economy is going quite well, with robust growth, a largely healthy labor market and relatively low inflation which nevertheless remains stuck above the Fed lens.
The long -term traders see a probability of almost 80% that the Fed will extend its break at the next rate meeting in March, according to data from the CME group.
‘Definite inflationary’
Since his return to duties on January 20, Trump has revived his threats to impose radical rates on American trade partners this weekend and to expel millions of undocumented workers.
He also said that he wanted to extend expired tax reductions and reduce administrative formalities on energy production.
Last week, Trump also relaunched his criticism of the independent Fed and its president Jerome Powell, which he first appointed to lead the American central bank.
“I will ask that interest rates drop immediately,” he said, adding later that he “would make a solid statement” if the Fed did not take his point of view on board.
Most – but not all – economists expect Trump’s pricing and immigration policies to be at least slightly inflationary, increasing the cost of the goods faced by consumers.
“I think these policies are definitely inflationists, it is just a question of what diploma,” said Zandi de Moody’s Analytics.
“A large part of the work (of the Fed) in the calibration of monetary policy is to react to what the legislators do, and if they cannot obtain a correction on what they do, then it pleads without Policy change, either higher or lower rates, “he added.
‘Significant ratings’
During the previous Fed meeting, political decision -makers recognized the number of prices reductions that they are expecting this year a median of only two, some incorporating hypotheses on Trump’s probable economic policies in their forecasts, according to trials -Arebaux de la Réunion.
Given the uncertainty about the effect of Trump’s policies on the American economy, analysts are now divided on the number of rate reductions that the Fed will do this year.
In a recent note of investors, Goldman Sachs economists said that their reference forecasts concerned two quarter -point drops, assuming a light and punctual effect on inflation “rate drops.”
“We keep our reference base according to which the FOMC will reduce the rates of 25 bp (base points) this year, in June,” wrote the barclays economists, pointing towards the underlying force of the economy.
Zandi de Moody’s Analytics said he also expects two rate drops later in the year.
But, he added, “there is significant chances that the next Fed decision may not be a drop in rate, it could be an increase in the rate”.