In the July meeting, the Federal Reserve it should keep i Stop interest ratesconfirming the current interval between 4.25% and 4.50%, in line with expectations market. It would be the fourth consecutive meeting without interventions, confirming an expectant strategy of President Jerome Powell in a still uncertain macroeconomic context.
The US economy continues to show sealing signs thanks to low unemployment, but the inflationary pressuresalso powered by New duties commercial, keep high caution of the monetary policy committee (FOMC). Powell should therefore reiterate a balanced approachleaving the possibility of a cut of rates open over the year.
Fed independence at risk
However, the meeting promises to be one of the most delicate of recent years, also on a political level. The President of the United States Donald Trumpin his second term, renewed the pressure on Powellasking for cuts “of at least three points” and openly criticizing the slowness of the action of the Fed.
Although the 1913 law provides for the possibility of Remove governors only for “just cause”the definition remains ambiguous and the situation raises questions about the independence of the central institute. Powell, so far, has avoided direct clashes, but has hinted that a premature monetary ease in a context of aggressive duties could have pro-inflammatory effects.
The tensions inside the board
Not just external pressures: even within the board they could emerge dissent. Some members, in particular Michelle Bowman and Christopher Wallerwould be ready to vote for a cut immediate of the rates, breaking the consent kept so far. A formal double dissent by governors (non -regional presidents) would represent a Rare and significant eventhighlighting a growing crack in the evaluation of macroeconomic conditions.
Market expectations
According to several analysts, the probability of a cut in September it is around at 60%while the hypothesis more realistic remains a first locking a Decemberwith a reduction of 25 base points. The evolution of core inflation, signals from the labor market and the degree of anchoring of inflationary expectations will be decisive for the next moves.
According to Paolo Zanghieri, Senior Economist of Generali Investmentsit is “widely awaited” that the FOMC maintains the rate unchanged, without providing clear indications on a possible cut in September. “This decision – underlines the expert – reflects the Federal Reserve strategy to remain flexible in the face of conflicting economic signals “.
“A change in the tone of the Fed regarding the conditions of the labor market. Recent data – such as the slowdown of hires, the increase in permanent working losses and the discount revisions of employment estimates – could lead to a more prudent evaluation. Although the Fed will probably reiterate that the labor market remains solid, this blended change could influence future orientation of monetary policy ”, highlights Zanghieri.
Meanwhile, the spotlights already move to others Jackson Hole’s symposium (21–23 August), which could represent the opportunity to redefine the trajectory of monetary policy in light of the updated data.
