The federal reserve is in a delicate position. Within the American central bank, the division concerning the interest rate policy increases, after former President Donald Trump announced new prices to foreign products. Will the great stranger: Will these prices cause such inflation which prevents future types of types, or will it be the lowest impact? The president of the Fed, Jerome Powell, opts for an intermediate approach. This does not exclude the type cuts later this summer, but insists that the economic data of the coming months will be decisive. Particular attention becomes inflation and the labor market.
A slower rhythm, but without signs of alarm
A type reduction this month seems to be rejected. However, Powell suggested that moderate inflation figures or a certain weakening of employment could be sufficient to reduce types at the end of summer. This is a relaxation concerning the much more strict conditions imposed by the Fed at the beginning of the year. The change in tone is motivated by Trump’s business strategy, which has unexpectedly announced new important prices. This has aroused concerns about a possible stagflation, a scenario in which the economy slows down while prices are increasing. Since then, Trump has partially called upon and has extended negotiations with other countries until August.
The prices do not yet feel in their pocket
For the moment, the price price increases are not yet clearly reflected in the data. Despite this, many economists expect it to change in June and July. Therefore, the Fed prefers to wait a little more before making a decision. According to the former Fed official Robert Kaplan, companies can absorb prices from 10% to 15% without immediately transferring consumer costs. It is only when prices increase prices.
The descent of the types is approaching, but it will be limited
Powell reiterated that the current level of types is “temporarily high” due to inflationary risks. If the price increases planned do not materialize, the central bank could take up the descent cycle it had stopped. However, the Fed maintains a prudent position. In the minutes of the last meeting, it is reflected that a minority of the committee opposes any reduction in types in the rest of the year. They say that four years of high inflation have accustomed the public at high prices, which complicates the target of 2%.
Faithful to Trump Press for immediate action
It is striking that two Fed members, Michelle Bowman and Christopher Waller, want to reduce the types already in July. The two were appointed by Trump and argue that the inflationary impact of the prices is limited. They don’t plan to wait for new data. Others, like Tom Barkin, of the Fed of Richmond, are more cautious. He stresses that price increases often take to appear, because companies sell stocks previously purchased from previous prices.
Attention as standard
President Powell declares that the Fed is open to the possibility that the inflationary effects of the prices are less than expected, but also want to avoid a premature reaction. “We learn,” he said this week. “We are open to the possibility that the impact is not as strong as what was thought.” A decision on types in September is expected. Until then, markets, companies and Bitcoin investors will be pending, as Fed decisions have a great impact on risk assets. According to current American economy data, it would not be necessary to reduce types. But if the federal reserve yields to political pressure, it could be very positive for Bitcoin.