The Federal Reserve (Fed) of the United States has decided to cut interest rates for the second time by 0.25 points to 4.75%, after lowering them half a point at once in September due to the moderation of inflation towards the theoretical objective of 2% and the slowdown in economic growth.
The North American central bank begins a new stage with Donald Trump back in the White House. In his previous stage as president of the world’s leading economy, he already ignored the supposed independence of monetary policy and publicly pressured the institution, which is currently in the process of easing financing conditions (lowering the cost of loans, mortgages…).
This Thursday’s 0.25 point cut was expected. Uncertainty comes from now on. Experts agree that the president of the Fed, Jerome Powell, now has the difficult task of “managing the impact” of Trump’s return to the White House, and of convincing the markets (investors), companies and families that can manage it.
The president-elect has promised to slap widespread tariffs on American imports and cut taxes on everything from corporate profits to overtime pay, policies that are inflationary. He has also introduced the possibility of changing the leadership of the Federal Reserve and has claimed the right to have some influence over interest rates.
“The Fed can’t know which of Trump’s proposed policies will be implemented, or in what order, and that alone could cause policymakers to act more cautiously,” explains Michael Feroli, chief economist at JPMorgan. for the United States, in an interview collected by the economic information agency ‘Bloomberg’.
Apart from political promises, there are interferences. “My only question is: who is our biggest enemy, Jay Powell or President [de China] Xi?”, he published in his first stage as president of the United States on Twitter in August 2019.
Before the elections, the Fed’s projections for the US economy pointed to “a soft landing”, as a slowdown in growth is called in monetary jargon, avoiding recession and major job losses.
The threat of this scenario was never an impediment for Powell to decide on one of the most aggressive cycles of interest rate increases, under the logic that a long period of high inflation is more impoverishing than a recession.
The problem at the moment is that with activity “landing,” Trump’s economic promises pose a risk of a new episode of price increases, because tariffs raise the cost of imports and tax cuts are a short-term boost. deadline for the claim. Trump’s ability to deliver on these promises will be strengthened if the Republican Party, which has already won the Senate, also maintains 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 large gap opens between the rates of the eurozone and the United States, a depreciation of the euro could occur with respect to the inflationary dollar (for the eurozone), because imports of oil and other materials automatically Premiums or products that are traded in dollars would become more expensive due to the effect of the exchange rate.
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