Fri, Jan 31, 2025 page5

• Powell says Fed in no hurry to cut rates

  TRUMP BLAMES INFLATION: The US Federal Reserve said the unemployment rate had stabilized and the labor market was still solid, but inflation remains elevated

  • AFP, WASHINGTON
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  The US Federal Reserve is in no “hurry” to adjust interest rates again, central bank Chairman Jerome Powell said on Wednesday, after policymakers voted to pause rate cuts in the first decision since Donald Trump’s White House return.

  The Fed’s rate-setting committee voted unanimously to keep the bank’s benchmark lending rate at between 4.25 percent and 4.5 percent, the Fed announced in a statement.

  “With our policy stance significantly less restrictive than it had been, and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell told reporters after the decision.

  

  US Federal Reserve Chairman Jerome Powell addresses a news conference following a Federal Open Market Committee meeting in Washington on Wednesday. Federal Reserve officials held interest rates steady, pausing to assess the inflation outlook following a string of rate reductions last year.

  Photo: Bloomberg

  In the statement, the Fed said the unemployment rate had stabilized “at a low level,” and the labor market was still solid.

  However, inflation “remains somewhat elevated,” the Fed said, removing a reference in earlier statements to inflation making progress toward its long-term target of 2 percent.

  Most analysts agree that the US economy is going fairly well, with robust growth, a largely healthy labor market, and relatively low inflation which nevertheless remains stuck above the Fed’s target.

  Futures traders see a probability of more than 80 percent that the Fed is to extend its pause to rate cuts at its March meeting, according to data from CME Group.

  However, in a post to his Truth Social account, US President Trump slammed both Powell and the Fed, accusing them of failing “to stop the problem they created with Inflation.”

  Since he returned to office on Jan. 20 this year, Trump has revived his threats to impose sweeping tariffs on US trading partners as soon as this weekend and to deport millions of undocumented workers.

  He has also said he wants to extend expiring tax cuts and slash red tape on energy production.

  Most — though not all — economists expect Trump’s tariff and immigration policies to be at least mildly inflationary, raising the cost of goods faced by consumers.

  Asked about the likely impact of Trump’s proposals, including tariffs, Powell said the Fed would have to “wait and see” how they affected the economy.

  At the previous Federal Open Market Committee (FOMC) meeting, policymakers dialed back the number of rate cuts they expect this year to a median of just two, with some incorporating assumptions about Trump’s likely economic policies into their forecasts, according to minutes of the meeting.

  Given the uncertainty about the effect of Trump’s policies on the US economy, analysts are now divided over how many rate cuts they expect the Fed to make this year.

  “We retain our baseline that the FOMC will cut rates 25bp [basis points] this year, in June,” Barclays PLC economists wrote in a note, pointing to the economy’s underlying strength.

  Moody’s Analytics chief economist Mark Zandi said he also expects two rate cuts later in the year.

  However, “there are meaningful odds that the next move by the Fed may not be a rate cut, it might be a rate increase,” he added.
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