Trump’s American Federal Reserve problem

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Your guide to what the second period of Trump means to Washington, business and the world

Last week was a special test for Jay Powell. Donald Trump has resumed his criticism of the US Federal Reserve Chairman for not reducing interest rates faster by describing him as a “stupid person”. On Wednesday, the American media reported that the president might nominate a new chair before the end of the Powell state in May 2026. The White House later said that the ads were not “imminent”, helping to cancel the sale of dollar. Rumors were launched about his job in the week, which started with other members of the Federal Reserve Development Committee to pressure the discounts as well.

If Trump wants price cuts, his interventions and chaotic policy agenda do not help his case. For beginners, if the president reveals his successor to a height shortly before, it will raise the possibility of anxiety. “Shadow Fed Chair“Who can refer to a more prices in the side lines. It would spoil confusion in the markets, and distort the transfer of monetary policy. At the present time, it also pays alleviation speculation in the position of future policy. The movements of the last market also showed, which weaken the dollar and enhance the situation for the highest rates on the margin.

Then there is an immediate uncertainty about the president’s tariff policies. At its meeting in mid -June, the Federal Reserve kept rates from 4.25 to 4.5 percent. But politicians were divided into where they should go after that. Recently, two of the Excellencies-including Christopher Wald, a pioneering candidate for Powell-the Federal Reserve should consider discounts as soon as possible next month. After all, there was only a slight rise in American inflation readings since the president’s identification ads on April 2. High rates that restrict growth. Credit card is determined at its highest levels for more than a decade and annual wage growth in job publications at its lowest levels in four years.

But a reasonable Powell warned. The data showed on Friday that in the annual growth in the basic personal consumption expenditures index – the preferred inflation scale of the Federal Reserve – rose to 2.7 percent. Indeed, it is too early to judge the effects of definitions on inflation. First, American companies are still operating through imported stocks. Pricing pressure may not appear from the current tariffs in inflation numbers until the summer months. The Federal Reserve is then a better position to understand how the highest duties pass through supply chains.

Second, Trump’s complete tariff bouquet has not yet reached. What are the duties that will prevail after July 9, when the final date of the president of the trading partners ends in re -negotiating the “Liberation Day” tariff. When these fees become a window, they will raise prices further. The administration also develops the additional definitions based on the sector. Other prices may also be built. Global oil prices are still vulnerable to a fragile ceasefire between Israel and Iran. It can add a beautiful “beautiful invoice” to Trump more price pressure.

If the customs tariff, the scroll of consumers, and the wider price shocks surprise the upper direction, there is a risk of a continuous rise in inflation-not just one-time jump in the price level. After all, the Americans have witnessed higher growth than prices for more than 4 years, and the expectation of inflation throughout the year remains high. But if the implementation of the customs tariff and uncertainty remains, the demand may decrease faster and thus raise the state of discounts.

Currently, maintaining prices suspended is the safest option due to each uncertainty. But this means that the risk of a policy error is high. If the central bank has more clarity about the range and timing of customs tariffs – and the larger president’s agenda – it will be in a much better position to make sure the risk of lowering prices sooner. The president will do a good job to realize that the dilemma faced by the Federal Reserve is largely the same.