U.S. Fed Maintains Rates Despite Criticism And Pressure From Trump

Despite calls from the United States president Donald Trump to the U.S. Federal Reserve to reduce rates of interest on the plea that the US economy needed such low rates for boosting its economic growth, they were left unchanged by the Reserve.

After the completion of a two-day policy meeting, the central bank said in a statement that the decision to maintain the target range for the federal funds rate at 2.25 per cent to 2.5 per cent was taken by the Federal Open Market Committee which is the Fed’s policy-making committee.

The arguments for the maintaining the rate of interest put forward by the Fed was that the labour market “remains strong” and that the economic activity “rose at a solid rate” since March. It also noted that at the same time in the first quarter, the growth of household spending and business fixed investment “slowed”.

In terms of the future adjustments to the federal funds rate, it would be “patient” reiterated the Fed, because, in its opinion, of the global economic and financial developments and the slow growth in inflation rates.

Just a day before the Fed decision on maintaining rates, Trump had severely criticised the agency for holding up the growth of the economy by not lowering the rates while also urging the Federal Reserve to to lower interest rates to boost the economy.

“Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening,” Trump tweeted on Tuesday.

“We have the potential to go up like a rocket if we did some lowering of rates, like one point, and some quantitative easing,” he said.

The decision of the central bank and its independence was defended by Fed Chairman Jerome Powell while responding to a question about outside political pressure. “We are a nonpolitical institution and that means we don’t think about short term political considerations,” Powell told reporters at a press conference. “We don’t discuss them and we don’t consider them in making our decisions one way or the other,” he added.

Currently, the policy stance taken by the Federal Reserve was appropriate, stressed Powell and added that the bank at the moment does not see any factor that can motivate it to move to either raise or lower interest rates in the US.

The recent weakness in price pressures is likely transitory, believes Powell in terms of soft inflation, and added that inflation will return to the target of 2 percent over time.

“We’re going to be watching inflation carefully to see that these things are transient and …we are strongly committed to 2 percent inflation objective,” he said.

(Adapted from Xinhuanet.com)


Categories: Economy & Finance, Regulations & Legal, Strategy, Sustainability, Uncategorized

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