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- US Federal Reserve makes interest rate adjustment, chairman maintains independence in face of external pressure
US Federal Reserve makes interest rate adjustment, chairman maintains independence in face of external pressure
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The US Federal Reserve cut interest rates by a quarter point on 7th November as expected, despite the US election results. Fed Chairman Jerome Powell said he would not resign if asked to do so by Trump, arguing that it is "not permitted by law" for the White House to force him out. Powell also insisted that the election would have no impact on the Fed's policy decisions in the short term, with forecasters predicting further reductions in borrowing costs in the coming months. The move comes after Trump previously criticized Powell for raising borrowing costs in 2018, and Powell's stance suggests a commitment to independence from political pressure.
We don't think it's a good time to be doing a lot of further guidance - there's a fair amount of uncertainty.
In the near term the election will have no effects on our policy decisions. We don't guess, speculate and we don't assume what future government policy choices will be.
In the near term, the election will have no effects on our policy decisions.
It's such an early stage - we don't know what the policies are, we don't know when they will be implemented.
We now expect the Fed to call time on this loosening cycle a little earlier than before. We anticipate additional 25 basis-point reductions at each meeting until next May, with the rate bottoming out at between 3.5 per cent and 3.75 per cent, 50 basis points higher than our pre-election forecast.
In the UK, it is looking increasingly likely that rates will no longer fall below 4 per cent in 2025, and in the US it seems interest rates will stay higher for longer as the Fed will need to tread very carefully until it is better able to assess the true impact of Trump's plans.
In the US, it seems interest rates will stay higher for longer as the Fed will need to tread very carefully until it is better able to assess the true impact of Trump's plans.
On both sides of the pond, we are seeing expectations for future rate cuts being scaled back considerably compared to what many had originally hoped for.
Stronger data and uncertainty over fiscal and trade policies mean rising risks that the Fed may opt to slow the pace of easing.
Despite fears that Trump will undermine the Fed's independence during his second term, we suspect the central bank will escape relatively unscathed. We don't expect Trump to try firing Powell.
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sources
perspectives
countries
organizations
- 1.Federal Reserve System
- 2.White House
- 3.Bank of England
- 4.Capital Economics
- 5.Democratic Party
- 6.Republican Party
- 7.Goldman Sachs
- 8.Quilter Investors