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Your Guide to what Trump’s second term for Washington, Business and the world means
Last week was particularly tested for Jayei Powell. Donald T. On Wednesday, US media reported that the president could nominate a new chair before Powell’s mandate expired in May 2026. The White House later said that no announcement was “immediate”, helping to fall apart sales in the dollar. Rumors about his work have completed a week that began with other members of the Fed Committee to determine the reduction.
If Trump wants a reduction in the rate, his interventions and the chaotic policy agenda do not help his cause. For beginners, if the president reveals his successor to Powell before his mandate has passed, then he increases the concerned perspective of “Shadow feed chair“Who could signal a greater direction in the rates of the sidelines. It would cause confusion in the markets and disrupt the transmission of monetary policy. At the moment, it also drives speculation about loosening in the future stance of politics. As recent markets have shown, it weakens the dollar.
Then there is immediate uncertainty about the president’s tariff policies. At a meeting in mid -June, the Fed had rates of 4.25 to 4.5 %. But its policy makers were divided on where to go next. Recently, two rate setters-including Christopher Waller, a leading candidate to succeed Powell-said the Fed should consider reducing as soon as next month. After all, there was only a little progress in reading US inflation from the president’s tariff announcements on April 2. High rates are limiting growth. Credit card delinquents have been the highest in more than a decade, and annual wage growth in the workplace is at the lowest level in four years.
But Powell’s caution is reasonable. Friday’s data showed that in May the annual growth of the basic expense index for personal consumption – the most desirable measure of Fed inflation – rose to 2.7 %. Indeed, it is too early to judge the effects of tariffs on inflation. First, US businesses are still working through imported repositories. Prices pressures from existing tariffs cannot occur in inflation numbers until the summer months. The Fed will then be in a better position to understand how higher duties go through the supply chains.
Second, Trump’s full tariff package is not yet hit. It is unclear what duties will prevail over July 9, when the president’s expiry for trade partners to rethink his tariffs for “Liberation Day”. When those taxes take effect, they will raise prices further. The administration also causes additional tariffs based on the sector. Other price pressures can also build. Global oil prices remain exposed to a fragile ceasefire between Israel and Iran. Trump’s “big beautiful account” can add extra pressure on prices.
If tariffs, consumer transition and wider pricing shocks surprise it upside down, then there is a risk of constant inflation rise-not just a one-time jump in price levels. After all, the Americans have experienced the target prices for more than 4 years, and expectations of one year of inflation remain elevated. But if the tariffs are delayed and the uncertainty lasts, then demand can be reduced faster and thereby raise the case of reductions.
For the time being, maintaining the standstill felt like the safest option given all the uncertainty. But that means the risk of politics error is high. If the central bank had more clarity than the volume and time of tariffs – and the president’s wider agenda – it would be a far better position to determine the risk of cutting rates earlier. The president will do well to realize that the dilemma Fed is facing is one of his own.
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