Federal Reserve policy has taken a head-spinning turn since December, fueled by the effects of President Trump's trade war on the economy
The Federal Reserve’s expected decision on Wednesday to cut interest rates again will spark new questions about whether Powell, its chairman, is caving to intense public pressure by Trump. While Powell strongly rejects that notion, the president’s policies have clearly forced the central bank’s hand.
“I’ve always thought the Fed has been a little bit slow to control the narrative about monetary policy,” said Seth Carpenter, chief U.S. economist at Swiss bank UBS and a former Fed official. “Throw Trump into the mix, and you’re in a completely different circumstance where he does like to drive the narrative.
The Fed has remained reticent to share details about its plans as it closely monitors the complicated economic picture. After the central bank lowered rates in July — its first cut in more than a decade — Powell suggested that the Fed wasn’t yet embarking on a full-blown cutting cycle. But markets are expecting several more reductions between now and early next year and will be watching the chairman closely for signals on that front.
“The United States, because of the Federal Reserve, is paying a MUCH higher Interest Rate than other competing countries,” the presidenton Monday. “They can’t believe how lucky they are that Jay Powell & the Fed don’t have a clue,” he added, calling for a “Big Interest Rate Drop.” “There’s no escaping the president’s bully pulpit, no matter what it is he’s talking about, not the least when it comes in the form of a tweet where it gets promoted and dissected,” said Sarah Binder, a political science professor at George Washington University. “It focuses media attention. It focuses public attention.”
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