WASHINGTON (AP) — Federal Reserve officials are expected to keep short-term interest rates on hold Wednesday. 3 cuts last yearIgnoring huge pressure to reduce borrowing costs from the white house I support seeing how the economy develops.
The central bank’s interest rate cuts last year were aimed at supporting the economy and preventing a sharp deterioration in the job market after hiring. Slowed down to a speed close to a crawl Following the imposition of significant tariffs by President Donald Trump in April of last year. Still there are signs unemployment rate stabilized And the economy could pick up. At the same time, inflation continues stubbornly on top Fed’s 2% target. All of these trends argue for keeping interest rates where they are.
A key question that Chairman Jerome Powell will likely address at Wednesday’s press conference is how long the Fed will keep interest rates unchanged. The rate-setting committee remains divided between officials who oppose further rate cuts until inflation falls and those who want them to further support employment.
Only 12 of the 19 participants attended the December committee meeting. supported At least one more rate cut is needed this year. Most economists expect the Fed to cut rates twice this year, likely after its June meeting.
Federal Reserve officials will meet this week in the shadow of unprecedented pressure from President Trump. Powell said on January 11th The Fed said it had received a subpoena from the Justice Department as part of a criminal investigation into his testimony to Congress regarding $2.5 billion in renovations to the building. In an unusually candid video statement, Chairman Powell said the subpoena was an excuse to punish the Fed for not cutting rates sooner.
And last week, the Supreme Court took up President Trump’s effort from last year. Fed Governor Lisa Cook fired Regarding allegations of mortgage fraud, she denies. In the Fed’s 112-year history, no president has ever fired a governor. the judges Oral argument It seemed like they were leaning toward allowing her to stay on the job until the case was resolved.
At the same time, President Trump indicated that he was close to naming a new Fed chair to replace Powell after his term ends in May. Although previously postponed, the announcement could come as early as this week.
Economists say the president’s efforts to put pressure on the Fed may have backfired after Senate Republicans backed Mr. Powell and threatened to block Mr. Trump from succeeding him as chairman.
“The last few weeks have been pretty positive for Fed independence,” said Patricia Zobel, a former New York Fed official and current head of macroeconomic research at Guggenheim Investments.
Still, the turmoil may have made Mr. Powell cringe as he neared the end of his term as chairman. Vincent Reinhart, a former Federal Reserve economist who is now chief economist at BNY Investments, noted that Mr. Powell has only given one speech that touched on the economy since September.
Reinhart said other Fed officials may be tasked with explaining why the central bank is holding off on cutting rates in the coming months. It also emphasizes that the chair does not make decisions solely on interest rates, he added.
“Chairman Powell’s contribution to news about our understanding of the Fed’s next move has been the smallest throughout his tenure,” Reinhart said.
Only 12 of the 19 members of the Fed’s rate-setting committee have voting rights, including all seven board members, the president of the New York Fed, and a rotating group of four regional Fed presidents.
This year, it’s Beth Hammack, president of the Cleveland Fed. Neel Kashkari, President of the Federal Reserve Bank of Minneapolis. Laurie Logan, President of the Federal Reserve Bank of Dallas. Philadelphia Fed President Anna Paulson is expected to vote on interest rate decisions. All have recently expressed skepticism about the need for further cuts in the near future.
Paulson said in a speech earlier this month that an improving economy should allow for further rate cuts this year.
“With inflation easing and the labor market stable, we expect growth to be around 2% this year,” he said. “If all of this happens, some further adjustments to the Fed’s key interest rates “will likely become appropriate later in the year.” ”
Economists expect larger-than-usual tax refunds in the coming months, further boosting consumer spending. And if economic growth picks up, it could end up increasing employment, which has weakened significantly even as the economy expands.
Consumers remain pessimistic about the economy as companies add little to no employment. Conference Board Consumer Confidence Measure Prices fall to 11-year low January Business Research Group announced Tuesday.
