As expected, the American Federal Reserve (FED) has not changed its fees, which guides the costs of loans of companies and individuals, for fear of an increase in inflation in a context marked by customs tasks and geopolitical crises.
The decision was made unanimously according to Reuters. It was the fourth Fed meeting since Donald Trump’s return to power in January. The previous three have already completed a status quo on the rates, located since December between 4.25% and 4.50%.
“Uncertainty about economic perspectives has decreased but remains high,” said the Central Bank in a press release.
Their managers still say that they consider two rates falls this year, a possibility that analysts doubt more and more, while the Federal Reserve has announced to degrade their forecasts for the US economy.
Now it predicts 1.4% GDP growth in 2025 (compared to 1.7% scheduled for March and 2.1% in December 2024) and 3% acceleration inflation (compared to 2.7% in March). They also anticipate an increase in the 4.5% unemployment rate (compared to 4.4% in March).
“The unemployment rate is still low and the conditions of the labor market are still solid,” said the Fed.
“While the labor market remains as it is and inflation decreases, the right thing is to keep rates without changes,” added Jerome Powell.
Donald Trump Furious
Even before this announcement, Donald Trump had expressed his frustration.
And he was caught again, the president of the American Central Bank, Jerome Powell, described as “stupid person.” He also said that the latter, which he himself designated to take the lead in the institution in 2018, was “politicized.”
“Maybe I should go to Fed. Can I designate myself?” Trump threw himself.
“Europe has suffered ten budget cuts, and no. And I suppose he is a politician, I don’t know, he said about Jerome Powell, the US president in an improvised speech in front of the White House. He is a politician who is not very intelligent, but it costs a fortune in the country.”
Caution before inflation
The US president had recently considered that the “point” rates of a percentage would be necessary to reduce to reduce the costs of loans of individuals and companies.
Central banks generally move their rates more slowly, a quarter of one point at the same time.
Above all, Fed officials have shown that they wanted to remain credible in the fight against inflation, and that the main risk was, for the moment, that of a derailment of prices due to new customs duties.
Many experts consider that the observation of an inflation moderation (A +2.1% for a year in April in the United States, according to the official PCE index) could have allowed Fed to reduce its rates this month, but that was not counting the dreaded impact of customs tasks in prices.
From his return to the White House, Trump has imposed at least one 10% surcharge to most of the products imported to the United States and threatens to go further.
At the moment, inflation remains measure, but it may not last. “Trump is somehow the reason when he says there is no impact on consumer prices,” Dan North, an allianz trade North America economist, told AFP.
The consumer, the engine of the American economy, seems in any case more attentive to his wallet. An indicator published on Tuesday shows that retail sales (in stores, restaurants, in concessionaires) are reflected in 0.9% in May.
The military escalation in the Middle East blurns painting more. The moderation of inflation that Mr. Trump welcomes is largely due to the fall in oil prices. The conflict threatens to make it established.
Source: BFM TV
