The US Federal Reserve is expected to announce a pause in rate cuts on Wednesday, as policymakers look to continue tackling inflation under close and vocal scrutiny from US President Donald Trump.
The Fed cut its key lending rate by a full percentage point in the final four months of last year and indicated it would move more cautiously going forward amid an uptick in inflation away from its long-term target of 2 percent.
“I think they will do nothing, and I think they should do nothing,” Federal Reserve Bank of St Louis former president Jim Bullard said. “I think the committee’s in very good shape right now.”
Photo: AFP
The Fed’s challenge this week is how to pause and communicate a data-dependent approach to future cuts without drawing the ire of Trump, who has expressed his desire for rates to come down.
“The goal will be to make as least amount of news as possible as they pause, which is well televised,” KPMG chief economist Diane Swonk said.
Financial markets saw a probability of more than 99 percent that the Fed would vote on Wednesday to hold interest rates at their current level of between 4.25 percent and 4.50 percent, CME Group data showed.
Trump has frequently criticized the Fed, which has a dual mandate from the US Congress to act independently to tackle inflation and unemployment. After returning to the White House, he renewed his attacks on the US central bank.
“I’ll demand that interest rates drop immediately,” Trump said on Thursday, later adding that he would “put in a strong statement” if the Fed — led by Fed chair Jerome Powell — did not listen to his views.
“I think I know interest rates much better than they do,” he said. “And I think I know certainly much better than the one who’s primarily in charge of making that decision.”
Trump’s public criticism of the Fed and Powell — whom he first nominated to run the US central bank — is unusual, and runs counter to the policy pursued by recent presidents of avoiding public criticism of the institution and its policymakers while in office.
“The Fed will not front-run any policies by the new administration,” Swonk said of the bank’s upcoming rate decision. “They will wait and see how they play out and how they actually affect the economy.”
The Fed’s expected pause comes against the backdrop of a small uptick in inflation, with a relatively robust labor market and strong economic growth.
Last month, Fed policymakers dialed back the number of rate cuts they expect for this year to a median of just two, with some incorporating assumptions about Trump’s likely economic policies into their forecasts, Fed minutes of the meeting showed.
Many economists see Trump’s tariffs and immigration proposals as inflationary, potentially keeping the Fed on pause for longer if they come into effect.
But this is not a universally held view.
"I think the story that tariffs are inflationary is overplayed in financial markets," said Jim Bullard, who is the Dr. Samuel R. Allen Dean of the Mitch Daniels School of Business at Purdue University. "We have seen this movie before: We had the first Trump administration."
"The (economic) growth effects are actually the ones to worry about, and most of those are coming through the uncertainty channel and not through the actual effects of actual tariffs," he added.
"I do think that this will be more business-friendly administration, and they may be able to do some stuff on the deregulation side," he said. "So that's probably the thing could have the biggest impact."
SEMICONDUCTORS: The German laser and plasma generator company will expand its local services as its specialized offerings support Taiwan’s semiconductor industries Trumpf SE + Co KG, a global leader in supplying laser technology and plasma generators used in chip production, is expanding its investments in Taiwan in an effort to deeply integrate into the global semiconductor supply chain in the pursuit of growth. The company, headquartered in Ditzingen, Germany, has invested significantly in a newly inaugurated regional technical center for plasma generators in Taoyuan, its latest expansion in Taiwan after being engaged in various industries for more than 25 years. The center, the first of its kind Trumpf built outside Germany, aims to serve customers from Taiwan, Japan, Southeast Asia and South Korea,
Gasoline and diesel prices at domestic fuel stations are to fall NT$0.2 per liter this week, down for a second consecutive week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) announced yesterday. Effective today, gasoline prices at CPC and Formosa stations are to drop to NT$26.4, NT$27.9 and NT$29.9 per liter for 92, 95 and 98-octane unleaded gasoline respectively, the companies said in separate statements. The price of premium diesel is to fall to NT$24.8 per liter at CPC stations and NT$24.6 at Formosa pumps, they said. The price adjustments came even as international crude oil prices rose last week, as traders
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which supplies advanced chips to Nvidia Corp and Apple Inc, yesterday reported NT$1.046 trillion (US$33.1 billion) in revenue for last quarter, driven by constantly strong demand for artificial intelligence (AI) chips, falling in the upper end of its forecast. Based on TSMC’s financial guidance, revenue would expand about 22 percent sequentially to the range from US$32.2 billion to US$33.4 billion during the final quarter of 2024, it told investors in October last year. Last year in total, revenue jumped 31.61 percent to NT$3.81 trillion, compared with NT$2.89 trillion generated in the year before, according to
PRECEDENTED TIMES: In news that surely does not shock, AI and tech exports drove a banner for exports last year as Taiwan’s economic growth experienced a flood tide Taiwan’s exports delivered a blockbuster finish to last year with last month’s shipments rising at the second-highest pace on record as demand for artificial intelligence (AI) hardware and advanced computing remained strong, the Ministry of Finance said yesterday. Exports surged 43.4 percent from a year earlier to US$62.48 billion last month, extending growth to 26 consecutive months. Imports climbed 14.9 percent to US$43.04 billion, the second-highest monthly level historically, resulting in a trade surplus of US$19.43 billion — more than double that of the year before. Department of Statistics Director-General Beatrice Tsai (蔡美娜) described the performance as “surprisingly outstanding,” forecasting export growth
RSS