The decision is expected to again result in a flood of criticism from the US President Donald Trump who repeatedly called on the central bank to lower interest rates.
It was generally expected that the FED would leave the interest rate unchanged at 4.25 to 4.5 percent. FED chairman Jerome Powell has always indicated that he is not in a hurry with reducing interest due to the lack of clarity about the impact of Trump’s policy on the economy. For example, the import duties on foreign goods can boost the inflation in the US.
‘Foolish’
Trump wants the Fed to support the economy with lower loan costs and after the interest rate decision in June, Powell still called a “stupid head”, “foolish” and a “Trump-Hater.” He also repeatedly played on the dismissal of Powell for the absence of interest rates.
US central bank more pessimistic about economics
In a statement, the FED stated that the economic activity in the first half of this year was weakened, but that the labor market remains solid. Inflation remains at a “somewhat” increased level, according to the central bank.
Replacement
Trump recently tried to use the high renovation costs of the FED headquarters to increase the pressure on Powell. After a visit to the Fed, however, Trump said that the renovation costs are probably not a good reason to fire Powell.
At both the FED and at the ECB, the eyes are focused on Trump
Trump would prefer to replace Powell with a chairman who wants to lower the interest. For example, Fed-Gouverneur Christopher Waller said last month that the interest should be lowered in July. He thinks that the impact of the taxes on inflation will be limited and will be short -lived.