While the independent Federal Reserve has started lowering rates from recent highs, officials have held the level steady this year as Trump's tariffs began rippling through the world's biggest economy.
“The hope is to stay below the radar screen at this meeting,“ KPMG chief economist Diane Swonk told AFP. “Uncertainty is still very high.”
Since returning to the presidency, Trump has slapped a 10 percent tariff on most US trading partners. Higher rates on dozens of economies are due to take effect in July, unless an existing pause is extended.
But economists expect it will take three to four months for tariff effects to show up in consumer prices.
Inflation has been muted too, even as analysts noted signs of smaller business margins -- meaning companies are bearing the brunt of tariffs for now.
The Fed faces growing pressure from Trump -- citing benign inflation data -- to lower rates more quickly, a move the president argues will help the country “pay much less interest on debt coming due.”
He said Powell could raise rates again if inflation picked up then.
'Cautious patience'
He believes they are unwilling to get ahead of the net effects from Trump's trade, tax, immigration and regulation policy changes.
While economists have warned that Trump's tariffs would fuel inflation and weigh on economic growth, supporters of Trump's policies argue the president's plans for tax cuts next year will boost the economy.
For now, analysts expect the central bank to slash rates two more times this year, beginning in September.
“They want to make sure that they’re reading the tea leaves correctly,“ he said.
During the pandemic, government stimulus payments helped households cushion the blow from higher costs, allowing them to keep spending.
“If this had been a world without tariffs, the Fed would be cutting right now. There’s no question,“ Swonk said.
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