Customs do the prices and weaken the economy (Photo: Freepik, Meshcube)
Washington-He would not fire Fed boss Powell, announced US President Trump this week. How long does that last? One thing is certain: Trump is allergic to criticism of his customs policy and finally wants interest rate cuts to boost the economy. However, neither markets nor experts expect that the US Federal Reserve will do it to him in the current interest rate decision.
The US fleet is currently at 4.25 to 4.50 percent-and since December, after the FED had reduced the interest in several steps in several steps in autumn. With Trump’s taking office, uncertainties have increased enormously, especially because of the leaked customs policy.
Old numbers: inflation weaker, labor market more than expected
The youngest Inflation decline Would speak for interest loosening-but this data is snow from yesterday, raised in front of Trump’s customs hammer on April 2. In March, US control decreased by 0.4 to 2.4 percent, the core rate without food and energy by 0.2 to 2.8 percent.
In addition to inflation, the FED has to work on low unemployment. The Employment plus In April, 177,000 jobs was more than expected, the quota stagnated at 4.2 percent. The labor market currently seems robust, which speaks against interest reductions. But how long?
Customs do tariffs – currency keepers in the dilemma
“The location is very difficult because the tariffs trigger a stagflationary shock”, says Don RissmillerChief economist at Strategas. Customs would be fueled by the prices that the labor market was at the same time endangered by the weakening of the economy. Interest up – or down? A binding mill for the Fed.
Trump’s tariffs Actually changing everything: import levies on cars, auto parts (25 percent) and for imports from China (145 percent) already apply. The 90-day moratorium is still running for broadband tariffs for many countries of at least 10 percent, and many states are probably negotiated.
Soft economic factors in the basement – independent Fed in danger
And the US economy is already fitting. That is surprising Gross domestic product shrunk by 0.3 percent in the 1st quarter – annualized, i.e. extrapolated to the year. Economists are even more concerned about the break -in of consumer mood and business climate.
Poison for the standing of the US economy are also Trump’s calls to reduce interest on the independent central bank, garnished with attacks against Fed President Jerome Powell (“Mr. Too Late”). After negative market reactions, Trump finally expressed that he did not want to replace Powell.
Powell names customs risks-interest forecast of the Fedwatch Tools
Trump had particularly angry Powell’s admissions on customs risks. The announced customs increases are significantly larger than expected said Powell Mid -April. This will also apply to the economic effects such as higher inflation and more slow growth.
The zin break today seems to be identified-but what do the markets expect at the upcoming Fed sessions? The Fedwatch tool The CME appointment exchange estimates the probability of reducing the range by 25 basis points to 400 to 425 basis points on June 18 to 28.6 percent. There is a chance of 72.8 percent at the latest on July 30th (7th May, 11 a.m. CEST).