Amid the looming threat of recession, the Jerome Powell-led Federal Open Market Committee (FOMC) is set to meet for the two-day summit this week.
The meeting, which scheduled for May 6 and May 7 will decide on the benchmark interest rate. However, more than the lending rates, the investors and the analysts will be closely noticing the commentary by the Fed Chair and any possible remarks on the fallout of tariff policy.
While inflationary pressure may influence the Fed officials to keep the interest rate steady, the sustained badgering by US President Donald Trump on rate cut may also play a role in the May 7 decision.
Many at the central bank expect that Powell will keep the interest rate steady in his May 7 announcement. After the reduction in 2024, the Fed has kept the rates unchanged. Currently, the interest rates are in range of 4.25 percent to 4.5 percent.
Additionally, the solid numbers from the labour market means that Fed chair will have a room to negotiate against a rate cut.
However, this may become just another flashpoint in Powell vs Trump turf war. Last week, Trump took to his social media platform, Truth Social, and wrote, “NO INFLATION, THE FED SHOULD LOWER ITS RATE!!!”
In his Friday post, Trump cited strong employment data and said that the prices of key commodities such as gas and eggs have come down. He also claimed that “billions of dollars” are coming in the US economy due to his aggressive tariff policy. Making a case for the rate cut, the US President said that the American economy was in a “TRANSITION STAGE.” This is not the first time that Trump has openly slammed the central bank. In another occasion, he had called the Fed chair “a loser”, which led many to debate whether Trump can actually fire Powell or not.
While the political slugfest continues, the Federal officials will be taking close look at the data coming on impact of tariffs, shrinking economy and inflation above the target range.
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