Fed may still cut interest rates this year—but now it could be ‘bad news’ if it does
Even because the economy goes through what it can beCross ChangesFederal Reserve is expected to reduce its basic interest rate twice this year – the same forecastIssued in DecemberA number
However, the reasons for the reduction may change dramatic depending on how the economy sends.
What was once seen as a “good news” interest rate in response to a stable decline in inflation at 2% of Fed, now it could now become “bad news”. Economy fights Quick reductions in widespread tariffs, rapid reductions in government expenses and economic uncertainty.
At the end of last year, Feed reduced its main interest rate three times, amounting to about 4.3%, from 5.3%. Fed rapidly raised its rate to fight inflation, and as rising prices, lower, which allowed the Central Bank to counteract several interest rates. Inflation dropped in Septemberlow 3 1/2 years of low2.4%.
However, inflation then moved louder in four straight months before it finally fell in February with an annual interest rate. Partly, the Chair Jerome Powell stressed that Fed is waiting for the standby and see regime, as it evaluates the influence of President Donald Trump’s policy on the economy.
The consumer mood has so farabruptBecause Americans are worried that inflation will rise in the coming months. Small business ownersReport a much more vague economic worldviewWhat can cause them to reduce hiring and investment?
Retail sellers of both high quality and low cost goodshave warnedThese consumers become more careful, because they expect the prices to rise due to tariffs. Retail sale has increased modestly after the sharp decline in January. Home structures and contractors expect the construction and repairs of the houseto get more expensiveA number
On Tuesday, Fed reported that the production product jumped last month by raising cars higher. Some of them could reflect higher automatic shopping by consumers who want to move forward on tariffs. The construction of a new house has also increased faster than expected.
Many economists have sharply reduced their predictions for growth this year Barclays:Bank, now forecast only 0.7% growth in 2024, from 2.5% of 2024.
Slower growth if it also causes unemployment and higher inflation will feed in AIn a very complicated placeA number usually when companies begin to cut employees, Fed will reduce interest rates to more borrow and spend and promote economy.
However, if inflation is creeping, he would like to slow down the high growth and curb inflation. When Fed raises its basic interest rate, it prone to higher loan costs higher, including mortgage loans, business loans and credit cards.
Wednesday Economists will watch Powell’s press conference closely to see if he will make it easier to feed such a situation.
But Powell will probably fall down his last effort to emphasize that Fed can now view the side.
“The cost of warning is very low,” said PowellAt the beginning of this monthA number of “We don’t need the fine of the economy really to do anything.”
Separately, Fed Management Board Member Christopher Walward has previously said that the Fed can reduce the pace this year, even if the tariffs are imposed until inflation has fallen yet.
Earlier this month, in an interview with Wall Street magazine, he realized that the impact of tariffs on prices would be difficult.
“You are trying to find such a fundamental signal, and what is the tariff noise?” He said. “And it’s tough.”
This story was originally shown Fortune.com
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