By Howard Schneider
Washington (Reuters) -ABD interest rate deduction, federal reserve officials entering policy meetings later in this month, while higher inflation symptoms and President Donald Trump’s demand for lower borrowing costs do not reveal data.
Trump appeared this week by trying to ignite the FED President Jerome Powell, but probably shook his head to the market deduction to follow, and the policy rate of the US Central Bank almost did not change despite the drama. Fed officials did not mention the upgrade rates, but the headlines about a close Powell ignition caused US treasury returns to jump, not exactly what Trump wants to finance cheaper financing for great federal deficits.
However, the FED is assigned to keep the inflation constant by not reducing government financing costs and it is expected to keep the comparison of 4.25-4.50% at the 29-30 July meeting. Fed final cutting rates began to factorize the possible impact on prices obtained from import tariffs, which Trump began to impose rapidly after returning to the White House in January.
The rate cuts are expected to continue in the future of this year, and investors foresee a quarter point decrease in September.
However, these rates, consumer price index inflation in June from 2.4% to 2.7% after showing this week fell to 50-50 this week. The decreasing prices of the goods may begin to change, to contribute to general inflation, and the enterprises may have started to put some tariffs to consumers.
Powell and other Fed officials said they expect this summer price increases to accelerate. They were reluctant to reduce how much inflation on the train, how long it lasts, and the economy began to slow down sufficiently to alleviate the pressure on prices.
FED policy makers will receive two more months work and inflation data before their meetings in September, and investors – and Trump management officials – will closely listen to Powell’s post -meeting press conference for a ratio deduction on July 30th.
In the last comments before the beginning of a “darkening” period in public opinion statements before the next meeting, the focus showed how the rise of the June is largely increased in goods imported goods.
Trade and tariff problems are now “the key driving forces of the US economic appearance”, the Fed Governor Adriana Kugler said on Thursday that the price pressure building should keep the rates constant in order to keep the rates of inflation and inflationist psychology under control.
“I see upward pressure on inflation from trade policies and expect additional price increases later in the year,” he said. For now, the maintenance of strict monetary policy “is important to fix longer -term inflation expectations.”
The Fed Governor Christopher Waller, who was mentioned as a possible backup for Powell, continued to repeat a ratio call that was cut at the meeting within two weeks on Thursday, to repeat the possibility that an upcoming economic slowdown and the impact of tariffs on inflation would not continue.
“We shouldn’t wait until the labor market deteriorates with the limited risks of inflation and inflation close to the target,” Waller said in the statements prepared for a speech made to the University of New York. He said.
‘Point of bending’
In 2022, the Fed used historically rapid interest rates to help involve inflation increase after the COVİD-19 pandemia.
In the autumn last autumn, the fed officials were confident enough that inflation began to reduce the rates towards the 2% target of the central bank and provided three cuts in the last four months of the year.
Trump has made high inflation criticism into a center of the 2024 Presidential campaign, and prices will actually fall to the clock and at the same time promising to increase tariffs.
As Trump’s opening arrived, the economy was still growing on the trend, and the labor market remained strict. Although the FED officials and staff are theoretically a price effect of tariffs, such as any tax, they are worried that these conditions can lead to a more permanent problem with the latest inflation vigil.
One of the reasons for focusing on tariffs as an inflation source and delaying ratio cuts was at the center of Trump’s anger in Powell, but this week, US central bankers said why the CPI data is still up to the target and probably ready to rise further.
Kugler estimated that future data will increase the price index used for the inflation target of the price index of future data to 2.5% in June, while the “core” measure, except for food and energy substances, increased by 2.8% higher than May.
In the case of inflation, Atlanta Fed President Raphael Bostic told Fox Business the day after the release of CPI, “We can be at a point of bending”. Almost half of the goods said he saw price increases with a rate of 5% or more of an rate he used to monitor the width of inflation during the pandemic fluctuation. This January was twice the share.
“The title number has moved away from our target, not right … We saw the highest increase in prices we see all year.” He said. He continued: “We see things that show that inflation pressure increases in the economy … Price pressure is real.”
In the economic projections published in June, FED officials expect PCE inflation to reach 3% by the end of this year, but it is still expected to reduce rates by 1 percent – a major decrease in Trump’s call for a 1% Fed rate.
No Fed official still approved the idea of Trump with the preferred approach.
“It is important to state that there is still the first days for the effects of tariffs,” New York FED President John Williams said this week. He said. “Although we see the relatively modest effects of the tariffs in hard total data so far, I expect these effects to increase in the coming months.”
(Reporting by Howard Schneider; Dan Burns and Paul Simao)
