Fed is unlikely to lower interest rates during June meeting

The Fed begins Tuesday Two-day June meeting In Washington, no one expects to lower interest rates. In fact, futures traders believe that the chances of the Fed lowering its benchmark rate are Less than 1%.

If the Fed does not lower interest rates as expected, it will be political pressure from President Donald Trump, who publicly calls Fed Chairman Jerome Powell a “fool” Many other titles.

So, why is the Fed unwilling to lower interest rates?

It depends on inflation expectations.

Although consumer inflation has cooled in recent months Stay above The Fed’s 2% target has maintained a continuous improvement for many years. Trump’s second tariffs introduce new uncertainty in the market and globally, The most important transaction relationship in the United States. Officials fear tariff announcements and chaos surrounding implementation will drive prices higher, especially as Americans become more accustomed to it Trade policy whipping.

Fed Chairman Powell, who was first appointed by Trump in 2017, insisted he would not take the lead. “We don’t think we need to be in a hurry,” he said. in May. “We felt that patience was appropriate.”

This puts the Fed in an increasingly awkward position. As tariff pressures are established, Trump now hopes to cut back to support his economy. But Powell was cautious about repeating the Fed’s 2021 mistake, underestimating how long high inflation would last.

Wait, see and maintain

In fact, the Fed chooses to wait and see to balance the risk of rising unemployment, if the rate is too high, rather than reducing the risk of inflation too early.

Although stock markets recovered from April’s “Liberation Day” downturn, U.S. GDP Slightly contracted in Q1 And it may shrink again in the second quarter. Jobs are growing slowly, and consumer sentiment seems to be improving, but is still shaking. Powell and his colleagues remain focused on credibility, highlighting the Fed’s position as an independent rather than a political institution. They believe that lowering rates may damage the Fed’s reputation more than any president’s social media Post.

The larger market seems to agree that a few months ago, Trump Float attempts to fire Powell, stock struggles to glidethe Dow Jones Index fell 1,000 points in a day. Such market moves show that the value of the independent Fed (who sticks to its public service mission and cannot be forced to bid for politicians) accounts for trillions of dollars.