- The American central bank leaves the policy rate in a range of 4.25% -4.50%
- The perspectives remain uncertain as Trump policies evolve
- The policy declaration cites the rate of growth still solid in the risk of risks
Washington: The federal reserve held stable interest rates on Wednesday, but said that the risks of higher inflation and unemployment had increased, more disturbing American economic prospects while its political decision -makers are struggling with the impact of President Donald Trump’s prices.
At this stage, the president of the Fed, Jerome Powell, said that it is not clear if the economy will continue its constant growth rate, or make a pardon in an increasing uncertainty and a possible peak in inflation.
With so much disruption of what Trump will finally decide and what survives possible and possible political battles, “the scope, the scale, the persistence of these effects are very, very uncertain,” Powell said at a press conference at the end of a two -day political meeting. “So it is not at all clear what is the appropriate answer for monetary policy for the moment … It is really not at all clear what we should do.”
“I don’t think we can say in which direction it will shake.”
It was Powell’s subtle way of saying that the American central bank, a key player in the training of the economy, was actually sidelined until Trump’s radical policy of the radical policy takes full effect.
The Fed policy declaration, which maintained the reference rate of the stable night in the range of 4.25% to 4.50%, noted that since the last meeting of the central bank in March, “uncertainty about economic prospects has increased further” and that risks increased that inflation and unemployment could increase.
Thomas Simons, chief economist of the United States at Jefferies, said that the language had minimized the disturbance of disturbances from the meeting from March 18 to 19 of the Fed, and how unpredictable the prospects had become.
“All the news of the price of the” Liberation Day “, the announcement of April 9 of a period of 90 days, the back and forth on commercial transactions and pricing exemptions in the headlines, and the resulting negativity expressed in commercial surveys and consumers make it impossible to judge what the economic prospects are, and even less to know if the risk of risks,” wrote Powell “predicted no.
Double mandate risks
The Fed declaration, and a large part of Powell’s comments to journalists, were also guaranteed for the continuous resilience of the economy, the job gains continuing and the economy is still increasing at a “solid pace”. The recently reported drop in gross domestic production in the first quarter, said Powell, was biased by a record rupture of imports, businesses and households trying to expect import taxes, with domestic demand measures.
But even this data demonstrated the dilemma against the Fed. The rush to the front to buy goods and shelves will probably not be repeated, and it is not clear if below it and the investment are starting to weaken – and how it will eventually express themselves in “hard” data on inflation and jobs.
The “beige book” of the Fed of anecdotal reports on the economy recently gave an austere image of suspension affairs, the drop in demand and the rise in prices.
“Companies and households are concerned … and postpone economic decisions of various types,” said Powell. “If this continues and nothing happens to relieve these concerns, you expect it to appear in economic data.”
However, the Fed cannot react until it is clear in which direction the economy pivots and how it assesses the risks to its two objectives of maintaining inflation at 2% and to maintain a maximum job.
“The current position of monetary policy leaves us well placed to react in a timely manner to potential economic developments,” said Powell, saying an expected approach that has become the central bank’s vocation card during the first months of the Trump administration.
The courses of American action extended the gains after the publication of the decision of the unanimous Fed policy and ended the day. Treasury yields have dropped, while the dollar has won against a basket of currencies.
‘Keeping model’
The orientation of the Fed policy will depend on which the employment and risks of inflation are developing, or, in the most difficult results, that inflation and unemployment increase together and oblige the Central Bank to choose which risk is the most important to try to compensate with monetary policy.
A lower labor market would generally strengthen the case with rate reductions; Higher inflation required that monetary policy remains tight.
“For the moment, the Fed remains in a relaxation scheme because it is waiting for uncertainty to be erased,” said Ashish Shah, director of public investments at Goldman Sachs Asset Management, adding that “recent employment data supported the Fed labor market, and that the UNUs are on the labor market to weaken enough to bring a restraint of its assistance cycle”.
The Fed policy rate has been unchanged since December while officials have trouble estimating the impact of Trump prices, which increased the prospect of higher inflation and slower economic growth this year.
When political decision-makers updated their economic and political projections for the last time in March, they planned to reduce the reference rate by half a point at the end of this year.