US FED in focus – what speaks for what against a change of lead

• July labor market report of the USA disappointed
• great hopes for one Interest rate in September
• Bofa economists warn of too much euphoria

In view of US President Donald Trump, the US Federal Powell, head of the US Federal State Powell, has an even greater attention to US interest policy than usual. The Republican has repeatedly tried to influence the Fed’s monetary policy. While the US President does not get tired of demanding lower key interest rates, currency authorities have so far left their monetary policy unchanged because they initially want to wait and see how the customs war, which Trump, has an impact on inflation in the United States.

But Trump’s attacks on the independence of the Fed are not well received on the market, because the Federal Reserve is actually an independent institution that is not subject to the president’s direct control. It is primarily based on economic data and its dual mandate: to ensure price stability and maximum employment.

Fed signals

Although the FED had the interest rate level unchanged despite the pressure from Trump, after her recent meeting it pointed out that economic growth has weakened in the first half of the year, while uncertainty about the economic prospects is still great. The former could be a first sign that the Fed will actually reduce the key interest rate in September for the first time since December 2024.

It was also extremely noteworthy that the decision to leave the key interest unanimously in the range between 4.25 and 4.5 percent was not unanimous. There were two Fed governors who demanded immediate reduction, so that the decision was made with 9 to 2 votes. Devatiators in interest decisions are very rare at the Fed, the last time it was in 1993 that two Fed governors made a different vote.

The focus of the economic data in the focus

However, expectations of an interest rate reduction in the United States have only increased properly after the recent monthly labor market report was surprisingly weak. In view of this, an interest rate reduction by 0.25 percentage points is now priced in with a large majority.

In addition, these hopes were given food from the latest inflation data: since the inflation pressure in the United States in July despite the tariffs, despite the tariffs, the data did not mean no fault for interest rate hopes.

Arguments against an interest rate reduction

According to “Marketwatch”, however, an economist team from Bofa Global Research fears that investors may put too much trust in an interest rate in September. At the moment, the Bofa experts remain in their assessment that the US currency keepers at the current interest rate level will probably be festive by 2026.

The economists argue that despite a declining demand for workers, the “doldrums” on the labor market had not increased significantly. This is due to the fact that the decline in demand was compensated for by a decline in the job offer. In this context, the Bofa team pointed out that more than 800,000 employees born abroad have left the US working world since April. If you look at the unemployment rate in the United States, it rose in July, but this was followed by a decline in June. Thus, the official data would continue to indicate that unemployment is still relatively low.

In addition, the Bofa data on consumer expenses via credit and debit cards seem to indicate that the expenses have increased. This could be an indication of a stronger development of the US economy, according to the Bofa team. This also typically speaks more for a more careful keeping of the central bank regarding interest reductions.

Editor finance.net

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