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Economists warn of a looming clash between the US Federal Reserve and President Donald Trump, as the central bank prepares to maintain interest rates despite the president’s push for significant rate cuts.
Following Trump’s recent executive orders upon returning to office, analysts anticipate Fed Chair Jay Powell to resist pressure from the White House in order to uphold market confidence and prevent a surge in inflation.
Former Treasury Secretary Lawrence Summers cautioned against government interference in monetary policy, highlighting the importance of the Fed’s independence in decision-making.
Despite Trump’s vocal calls for rate reductions, the Fed is expected to hold rates steady on Wednesday, potentially straining the relationship between the central bank and the administration.
Global central banks gained autonomy in setting interest rates in response to past inflation crises, aiming to shield monetary policy from political influence. President Trump’s public demands for rate cuts may test the Fed’s commitment to independence.
While uncertainties persist over the impact of Trump’s policies on inflation and economic activity, the Fed is likely to proceed cautiously with rate adjustments to avoid market disruptions.
Market observers anticipate Powell to maintain a neutral stance on political matters during his press conference, focusing on data-driven decision-making rather than reacting to external pressures.
Despite tensions between the Fed and the White House, Powell’s tenure as chair is expected to continue until 2026, with potential legal challenges if Trump attempts to remove him.
The dynamic between politicians and central banks underscores the delicate balance of independence and accountability in monetary policy decision-making.
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“I am unable to attend the meeting tomorrow due to a prior commitment.”
Due to a prior engagement, I will not be able to attend the meeting tomorrow.