Powell noted that when Trump applied tariffs during his last administration, the Fed ended up lowering its key rate because the GDP slowed so much. Trump expects the same this time around. However, Powell is not in a hurry.
Powell already cut its key rate three times last year to about 4.3%. Therefore, in January, Powell decided that the Fed would pause any further cuts amid signs that inflation has remained stuck above its target.
The Fed governor Christopher Waller explained that there are cuts for “good news” and cuts for “bad news.”
“Bad news” cuts happen when the Fed lowers rates because it thinks the economy is slowing down. This is what happened last year and what Trump is panicking about.
“Good news” cuts happen when the Fed thinks inflation is back to its goal level of 2%. According to Waller, the Fed can pull off “good news” rate cuts later this year. However, he didn’t think that a cut would happen at the Fed’s next meeting this month.
Powell blames Trump’s policies for the crisis
Trump hit the ground running immediately after entering office. It has been policy after policy with the help of his administration and Musk’s DOGE. The tariff agenda was the first in line. This has caused chaos not only with those hit by the tariffs but they have had an impact on America as well.
Trump has turned to the FED to solve its mess. He instructed Powell to cut interest rates. Powell didn’t do it. According to him, Trump should fix it. Powell said the White House “is in the process of implementing significant policy changes in four distinct areas: trade, immigration, fiscal policy, and regulation […] It is the net effect of these policy changes that will matter for the economy and for the path of monetary policy.”
Trump told Jerome Powell to cut interest rates.
Powell didn’t do it.
Now Trump is trying to force Powell to cut interest rates by crashing asset prices.
Powell noted that the uncertainty around the changes and their likely effects remains high. He said the Fed is focused on something different. He said the focus is on “ separating the signal from the noise as the outlook evolves. We do not need to be in a hurry, and are well positioned to wait for greater clarity.”
Powell’s stance is on a positive note. In his assessment, Powell said mostly good things about the big picture. He said the U.S. is in a good place with a solid labor market and inflation moving back to its target.
The Labor Department revealed a gain of 151,000 jobs in nonfarm payroll for the month of February. Some people thought the number would be a little higher, but Powell said the report shows that the labor market is solid and broadly in balance.
However, recent polls showed people were worried about the direction of inflation, which was mostly caused by Trump’s talk about tariffs. Their favorite measure of inflation showed that it was 2.5% over the past 12 months, or 2.6% if food and energy were taken out of the equation. Powell said, “The path to sustainably returning inflation to our target has been bumpy, and we expect that to continue.”
The markets responses
Today, the U.S. stock index futures went down because people were still worried about how the Trump administration’s tax policies might affect the biggest economy in the world. China will put tariffs on some U.S. goods as a response today, and the U.S. will likely put tariffs on some base metals later this week.
Investors will also watch U.S.-Canada ties. This is especially true because official results show that Mark Carney, a former central banker, won the race to become leader of Canada’s ruling Liberal Party. He will take over as prime minister from Justin Trudeau.
This uncertainty caused the benchmark S&P 500 to drop the most in a week since September. On Thursday, the tech-heavy Nasdaq fell more than 10% from its December record high. As of last week, the CBOE Volatility measure was at a level that hadn’t been seen since December.
Chinese stocks that are traded in the U.S., like Alibaba, fell 2.4%, Bilibili fell 4.4%, and Xpeng fell 2.7%. This was after reports from China made people less optimistic about the world’s second-largest economy’s recovery.
Crypto stocks like MicroStrategy fell 5.3%, Coinbase fell 5.5%, and Riot fell 4.3%, all of which were in line with bitcoin’s 4% drop.
This week has begun with further crashes. Stocks in the Dow fell 299 points, which is 0.7%. Stocks in the S&P 500 fell 48.75 points, which is 0.84%, and stocks in the Nasdaq 100 fell 198.5 points, which is 0.98%. Also, Nvidia fell 2%, while Meta and Amazon.com both fell more than 1.3%. The price of Tesla stock was not an exception, as it dropped 2.6%.
The crypto market has been further damaged. Regardless of the White House crypto meeting, the major coins have declined yet again. Bitcoin has returned to the $80K range, following a recent comeback to $90K. It is now priced at $83,195. On the other hand, Ethereum has dropped to $2,000. It is currently at$2,121.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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