US Fed poised to hold off on rate cuts, defying Trump pressure
Policymakers at the independent Federal Reserve have kept the benchmark lending rate steady since the start of the year as they monitor how Trump's sweeping tariffs are impacting the world's biggest economy.
With Trump's on-again, offagain tariff approach -- and the levies' lagged effects on inflation -- Fed officials want to see economic data from this summer to gauge how prices are being affected.
When mulling changes to interest rates, the central bank -- which meets on Tuesday and Wednesday -- seeks a balance between reining in inflation and the health of the jobs market.
But the bank's data-dependent approach has enraged the Republican president, who has repeatedly criticized Fed Chair Jerome Powell for not slashing rates further, calling him a 'numbskull' and 'moron.'
Most recently, Trump signaled he could use the Fed's $2.5 billion renovation project as an avenue to oust Powell, before backing off and saying that would be unlikely.
Trump visited the Fed construction site on Thursday, making a tense appearance with Powell in which the Fed chair disputed Trump's characterization of the total cost of the refurbishment in front of the cameras.
But economists expect the Fed to look past the political pressure at its policy meeting.
'We're just now beginning to see the evidence of tariffs' impact on inflation,' said Ryan Sweet, chief US economist at Oxford Economics.
'We're going to see it (too) in July and August, and we think that's going to give the Fed reason to remain on the sidelines,' he told AFP.
'Trial balloon'
Since returning to the presidency in January, Trump has imposed a 10% tariff on goods from almost all countries, as well as steeper rates on steel, aluminum and autos.
The effect on inflation has so far been limited, prompting the US leader to use this as grounds for calling for interest rates to be lowered by three percentage points.
Currently, the benchmark lending rate stands at a range between 4.25% and 4.50%.
Trump also argues that lower rates would save the government money on interest payments, and floated the idea of firing Powell. The comments roiled financial markets.
'Powell can see that the administration floated this trial balloon' of ousting him before walking it back on the market's reaction, Sweet said.
'It showed that markets value an independent central bank,' the Oxford Economics analyst added, anticipating Powell will be instead more influenced by labor market concerns.
Powell's term as Fed chair ends in May 2026.
Jobs market 'fissures'
Analysts expect to see a couple of members break ranks if the Fed's rate-setting committee decides for a fifth straight meeting to keep interest rates unchanged.
Sweet cautioned that some observers may spin dissents as pushback on Powell but argued this is not necessarily the case.
'It's not out-of-line or unusual to see, at times when there's a high degree of uncertainty, or maybe a turning point in policy, that you get one or two people dissenting,' said Nationwide chief economist Kathy Bostjancic.
Fed Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman have both signaled openness to rate cuts as early as July, meaning their disagreement with a decision to hold rates steady would not surprise markets.
Bostjancic said that too many dissents could be 'eyebrow-raising,' and lead some to question if Powell is losing control of the board, but added: 'I don't anticipate that to be the case.'
For Sweet, 'the big wild card is the labor market.'
There has been weakness in the private sector, while the hiring rate has been below average and the number of permanent job losers is rising.
'There are some fissures in the labor market, but they haven't turned into fault lines yet,' Sweet said.
If the labor market suddenly weakened, he said he would expect the Fed to start cutting interest rates sooner.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Gulf Insider
7 hours ago
- Gulf Insider
Israel To Take Control Of All Of Gaza
There have been reports all week which have said that Israel is now intent on conquering and occupying the whole of the Gaza Strip, and when asked about it Tuesday Presdient Trump responded, 'It is going to be pretty much up to Israel.' In a fresh Thursday report, Axios writes that Trump 'does not oppose Israeli Prime Minister Benjamin Netanyahu's plan to launch a new military operation to occupy the entire Gaza Strip, U.S. and Israeli officials say.' There's been some nuance in Netanyahu's position, however, as he's sought to distance himself from claims that he's planning a permanent occupation by Israeli forces. 'We intend to,' Netanyahu affirmed to Fox News when asked if he aims to take over the whole the strip. But then he said it would eventually be given over to a responsibly governing entitiy. 'We don't want to keep it. We want to have a security perimeter. We don't want to govern it. We don't want to be there as a governing body,' he said. Also, Netanyahu's office has told Axios , 'We are not willing to remain in the current limbo and we are not willing to surrender to Hamas' demands — so essentially only one option is left, to take a drastic step. This is the last card we have left.' Critics and skeptics have said Israel has long been deceptive at many points about its war aims. The whole counter-Hamas operation was launched with limited goals initially articulated, centered on taking out Hamas leadership and gaining the liberation of all captives – but the scope of operations have clearly shifted and been extended. Military leadership has taken a more cautious approach, warning that efforts to permanently control Gaza would be falling into a 'trap' – as we reported earlier. Kan News public broadcaster previously stated 'The prime minister's direction is to go and conquer the Gaza Strip.' The Israeli military's (IDF) chief of staff, Lt.-Gen. Eyal Zamir, has argued in a closed-door cabinet meeting that this 'will significantly endanger their lives and cause the army to burn out.' Aerial view showing utter destruction of the Gaza Strip… The past year has seen Netanyahu clarify to political allies and opponets alike that he's opting for a military solution. Criticis have said he's putting the remaining hostages in danger. As for what group might one day take over, it is entirely doubtul that any Palestinian body – such as the Palestinian Authority – will actually be allowed to step in and govern by Israel. This is indeed a recipe for permanent occupation and annexation. Also read: Trump Tells Mideast Nations To Join Abraham Accords Now That Iran's 'Nuclear Arsenal Totally Obliterated'
Gulf Insider
7 hours ago
- Gulf Insider
Trump Tells Mideast Nations To Join Abraham Accords
President Donald Trump on Thursday once again issued a call for Middle East countries to join his Abraham Accords, on the basis that this will ensure peace now that Iran's 'nuclear arsenal' had been 'obliterated'. 'Now that the nuclear arsenal being 'created' by Iran has been totally OBLITERATED, it is very important to me that all Middle Eastern Countries join the Abraham Accords,' Trump wrote in a social media post. So far, the four Muslim-majority countries of the United Arab Emirates (UAE), Bahrain, and Morocco, with Sudan have signed on – normalizing relations with Israel – which was the result of efforts during Trump's first term. Washington has long pushed for Saudi Arabia to join, and there's been talk of post-Assad Syria joining too – but all of this has been deeply complicated by the Gaza war. As for whether Iran's nuclear program has in fact been 'obliterated' – this remains very much an open question, after much speculation that the bulk of the Islamic Republic's enriched uranium had already been moved well before US strikes hit three nuclear facilities at the end of the 12-day war launched by Israel in June. Fresh Thursday statements from Iran's chief negotiator suggest Tehran is slamming the door on jump-starting nuclear talks with the United States: Senior Iranian official Abbas Araghchi issued a stark message regarding the future of nuclear negotiations with Washington, telling the media that Tehran had no intention of returning to talks with the U.S. under pressure. 'Whether dialogue and negotiations take place in the near or distant future depends on what our national interests require,' Araghchi said, according to the U.K.-based outlet IranWire. Araghchi said Iran was imposing 'new conditions' for its relationship with the IAEA, which must now obtain approval from the Supreme National Security Council, an entity closely tied to the supreme leader and the military-security establishment, Iranian media reported. There are obvious reasons why Iranian leaders would see such renewed dialogue as futile and condemned to failure. It had already been engaging in several rounds of talks with US negotiators at the very moment it was attacked by Israel, which President Trump reportedly greenlighted. Yet so far the Trump-backed ceasefire which brought the June war to an end has held. Despite a spate of deaths among nuclear scientists and top military officials, Iranian officials have indicated the country's nuclear program has only been set back by months – and that it has plenty more nuclear scientists to rely on. 'Buildings can be rebuilt. Machines can be replaced, because the technology is there. We have plenty of scientists and technicians who used to work in our facilities,' Foreign Minister Abbas Araghchi explained in a recent interview with the Financial Times . Iran has long maintained its program is only for peace nuclear energy purposes. Also read: Toyota Q1 Net Profit Plunges 37% After Trump Tariff Hit
Gulf Insider
8 hours ago
- Gulf Insider
Kremlin Confirms Trump-Putin Meeting
The Kremlin has on Thursday belatedly confirmed that a meeting between presidents Donald Trump and Vladimir Putin has been agreed to and will take place in the 'coming days'. The White House first unveiled it yesterday, as reported in the NY Times, but it was as yet unclear to degree to which Moscow was on board. But now Russia has agreed 'in principle'. According to a statement of Putin's longtime foreign policy aide, Yury Ushakov, 'At the suggestion of the American side, an agreement in principle was made to hold a bilateral meeting at the highest level in the coming days.' He laid out that the idea of a Trump-Putin-Zelensky meeting (which apparently Washington pushed for) 'for some reason was mentioned by Washington yesterday' but 'not specifically discussed,' Ushakov added, explaining that the Russian side 'left this option completely, completely without comment.' This was in reference to the intense three-hour meeting that Trump's envoy Steve Witkoff had with both Putin and his top negotiator and investment chief Kirill Dmitriev. 'We have launched work to discuss the parameters of such a meeting and the venue for it jointly with our American colleagues now,' Ushakov said additionally. 'By the way, I'd like to note that the venue, too, has been agreed in principle and will be announced a bit later,' he added. Putin's office has described that the interest in a face-to-face meeting, which will mark the first of Trump's second term – was mutual. One location being already floated as a possibility is the United Arab Emirates. As for a Zelensky meeting, President Trump has indicated this would happen just bilaterally soon following his sit-down with Putin. Trump had been quoted Thursday as saying 'that there will be a meeting [with Putin] very soon' and 'that we could be ending' the Ukraine conflict. 'We haven't determined where [the meeting would take place], but we had some very good talks with President Putin today.' But this is all a bit surprising as nothing has fundamentally changed in the warring sides' stances. Moscow has not backed off its maximalist war goals, and will not budge from giving up the four eastern territories it has long declared part of the Russan Federation after a popular referendum, or what was fundamentlally annexation vote. The Zelensky government hasn't issued any indication that it's ready for territorial concessions – and it even wants to keep laying claim to Crimea. Meanwhile the tariffs offensive continues, with more taking effect overnight: After months of threats, delays and extensions, President Donald Trump's sweeping tariffs took effect overnight, raising the overall average tariff rate to more than 17%, its highest since the Great Depression. Everything from European Union appliances and Japanese cars to food, furniture and toys from China TVs from South Korea will be hit. However, selected oil and gas imports, along with some smartphones and goods covered by a pre-existing trade agreement with Canada and Mexico, are not affected. Trump has indicated his trade offensive won't stop. The president said he still plans to impose import taxes on pharmaceutical products and semiconductors. Amid that pressure, Apple said it plans to invest $600 billion in the U.S. over the next four years amid pressure from Trump to shift its supply chain to American soil. Meanwhile, Trump hiked the tariff rate for India to 50% because of the nation's purchases of Russian oil, and he said he could raise the European Union's tariff level to 35% from 15% if it reneges on an investment commitment. PUTIN AND TRUMP MAY MEET IN DUBAI, UAE"The UAE is one of the suitable places for the meeting [with Trump]," – Vladimir Putin, President of Russia, during his meeting with UAE's Mohammed bin Zayed at the Kremlin. — Russian Market (@runews) August 7, 2025 Click here to read more Also read: Trump, Putin To Meet As Soon As Next Week In Potential Breakthrough
