The Federal Reserve (Fed) of the United States has decided to lower its interest rates for the second time by 0.25 points to 4.75%, after lowering them by half a point in September due to the moderation of inflation towards the theoretical objective of 2% and the slowdown of economic growth.
The North American central bank is entering a new stage with the return of Donald Trump to the White House. During his previous presidency of the world’s largest economy, he had already ignored the supposed independence of monetary policy and publicly put pressure on the institution, which is currently in the process of easing financing conditions (reducing the cost of loans, mortgages…).
This Thursday’s drop of 0.25 points was expected. The uncertainty comes now. Experts agree that Fed Chairman Jerome Powell now has the difficult task of “managing the impact” of Trump’s return to the White House, and convincing markets (investors), businesses and families capable of managing it.
The president-elect has promised to impose across-the-board tariffs on U.S. imports and cut taxes on everything from corporate profits to overtime, inflationary policies. He also introduced the possibility of changing the leadership of the Federal Reserve and claimed the right to exert some influence over interest rates.
“The Fed cannot know which policies proposed by Trump will be implemented, or in what order, and that alone could prompt policymakers to act more cautiously,” says Michael Feroli, JPMorgan’s chief U.S. economist. United, in an interview. collected by the economic information agency “Bloomberg”.
Beyond political promises, there is interference. “My only question is: Who is our biggest enemy, Jay Powell or the president? [de China] Xi? “, he posted on Twitter during his first stop as president of the United States in August 2019.
Before the election, the Fed’s projections for the U.S. economy called for a “soft landing,” as a slowdown in growth is called in monetary parlance, avoiding a recession and significant job losses.
The threat of this scenario never stopped Powell from deciding on one of the most aggressive interest rate hike cycles, based on the logic that a long period of high inflation is more impoverishing than a recession.
The problem right now is that with activity “landing”, Trump’s economic promises pose the risk of another episode of rising prices, as tariffs increase the cost of imports and tax cuts are only a short-term boost to these demands. Trump’s ability to deliver on his promises will be strengthened if the Republican Party, which has already won the Senate, also retains control of the House of Representatives, which appears increasingly likely.
From our point of view, the European Central Bank (ECB) It is conditioned by the Federal Reserve because if a significant gap opens between the rates of the euro zone and those of the United States, a depreciation of the euro could occur in relation to the inflationary dollar (for the euro zone), because imports of oil and other materials automatically Premiums or products traded in dollars would become more expensive due to the exchange rate effect.
