The monetary institution should leave its rates at the level which has been theirs since December, in a range between 4.25% and 4.50%.
The American central bank meets next week for the third time since Donald Trump’s return to the White House, in an economic landscape above below, and under the arrows of the Head of State. The outcome of the federal reserve meeting (Fed), scheduled for Tuesday and Wednesday, has little doubt in the eyes of the vast majority of finance players.
The monetary institution should leave its rates at the level which has been theirs since December, in a range between 4.25% and 4.50%. Its officials said they first wanted to gauge how the economy was going to land in the face of the magnitude of the protectionist offensive launched by Donald Trump.
However, even if regular economic barometers show increasing nervousness, official indicators remain contained (4.2% unemployment in April, 2.3% inflation in March, slightly above the Fed target). The problem is what will follow. During their last meeting, Fed officials degraded their forecasts for the first world economy, anticipating less growth, more inflation and unemployment.
“It means they are worried”
The trade war between Washington and Beijing leads to exorbitant customs duties which put an end to the exchanges between the two powers. And the minimum surcharge of 10% implemented by the republican billionaire on products from the rest of the world – to cocoa which is not cultivated in the United States – also adds the daily life of American companies and households.
«It is complicated to say at present if the economy will enter a recession, but customs duties will at least slow down growth“, Estens AFP Loretta Mester, ex-president (2014-2024) of the Cleveland Fed (northern United States). In this context, freezing rates is “The good thing to do», Even if it means reducing them faster then in the event of objective degradation of the activity, adds the one who now teaches at the business school in Wharton, Pennsylvania (East).
If Fed officials “Lower the rates now, that means that they are worried, and it will be worse», Pointe Belinda Roman, professor of economics at St Mary’s University, in San Antonio, Texas. Because, she said to AFP, “If the markets think that the Fed panic, then there everyone will really panic».
