All as a script: the Fed is not surprising and confirms interest rates for the fifth consecutive time. A decision that, like the previous ones, has annoyed the American president Donald Trump, who has long been a cut, criticizing the immobility of the US central bank and its president Jerome Powell. But the number one of the Federal Reserve pulls straight on his way, also reluctant to give confirmation about the possibility of a cut in September, but this time there is a new fact: the board is now split.
The decision of the FOMC
The Federal Open Market Committee (FOMC) decided to leave interest rates in an interval between 4.25% and 4.50% for the fifth consecutive meeting (the last cut was in December 2024).
The decision was voted in favor by nine members – Jerome Powell President; John C. Williams Vice President, Michael S. Barr, Susan M. Collins, Lisa D. Cook, Austan D. Goolsbee, Philip N. Jefferson, Alberto G. Musalem, and Jeffrey R. Schmid – while they voted against Michelle W. Bowman and Christopher J. Waller, who would have preferred to cut the interval of the target of 25 basis. Adriana D. Kugler is absent. This was the first time since the end of 1993 that two members of the FOMC disappeared. A new fact that cannot be ignored and that suggests a crack in the board.
The FOMC has also confirmed that it will continue to reduce its participations in Treasury securities, public debt and securities guaranteed by a mortgage of public bodies, the result of the previous quantitative Easing measures.
Trump: cut in September, but always too late
Trump continues to attack Powell despite the data on the GDP released yesterday confirmed a robust growth of 3% of the US economy, exceeding expectations.
“Keeping the rates so high is damaging the US and it’s all the fault of the Fed”, Trump reiterated in a press point, before the announcement of the decisions, adding “we should lower the interest rates, I know that the cut will be in September”.
“Powell is always late, even if he had cut them today,” added the Tycoon, who gave the president of the Fed the name “Too Late” (too late).
Powell cools the expectation of an intervention after the summer
In spite of the conviction of the US President, the expected cut for September is not at all insured. In the press conference that followed the FOMC meeting, in fact, Powell attenuated the expectations of a cut in September, stating that interest rates are in the right position to manage the continuous uncertainty about duties and inflation. “There are still many, many uncertainties to solve – he explained – it does not seem that we are very close to the end of this process”.
Although there will be two whole months of data before the Fed meeting of 16-17 September, Powell said that the central bank is still in the early stages of understanding how the rewriting of taxes on imports by Trump and other political changes will evolve in terms of inflation, employment and economic growth. “We must think that it is still early – he reiterated – there will be a lot of data coming before the next meeting. They will be decisive? It is really difficult to say”.
Speaking of the “opposite” vote of the bankers Waller and Bowman, Powell described their opposition as part of a debate “discussed, with great attention to everyone around the table”.
