American central bank resists Trump: interest rates do not reduce

No recession in sight

The FED strives for a double goal: price stability (defined as inflation of 2 percent) and maximum employment. Currently, inflation is 2.4 percent and unemployment at 4.2 percent. The problem for the FED is that inflation fighting benefits from higher interest rates, but economic growth – and therefore employment – precisely with lower interest rates. Powell acknowledged that these objectives may be at odds with each other, if Trumps taxes are ultimately high. « This would make our work very complicated and challenging, » he said.

The FED will keep all options open for the coming period and is waiting for more data about the development of the economy. Consumer confidence has plummeted in January since Trumps, but job growth in the US remains strong. « There is so much that we don’t know, » said Powell.

A recession does not yet provide the FED. « Economic activity seems to continue to grow, at a sturdy pace, » said Powell. In addition to import duties, Trumps are also migration policy, deregulation agenda and his budget policy are uncertain factors for the economy and for inflation development.

Independence of Fed

For the time being, Powell seems to be resistant to Trump’s political attacks. Powell’s term will expire in May 2026. On April 21, the stock markets made a dive, after a Trump adviser said that the government could be looking at whether Powell could be fired. Then Trump began to scribble back: he would not fire Powell. The independent position of central banks is a pillar under economic and financial stability.

Asked for Trumps interference with the Fed, Powell said in the press conference that he « has no influence » on how the Fed does its job.