By Marta Garde
Washington, Jan 29 (EFE).- The United States Federal Reserve on Wednesday broke the cycle of interest rate cuts that began in September, keeping rates at their current range of 4.25% to 4.5% and ignoring President Donald Trump’s public call for more immediate reductions.
The regulator made its decision at the end of a two-day meeting of its Federal Open Market Committee, the first of the year and also the first to be held under the Republican leader’s second term, which began on Jan.20.
At its last meeting on Dec. 17 and 18 – still under the presidency of Democrat Joe Biden (2021-2025)- the Fed cut rates for the third time in a year, but anticipated a slower pace in 2025, noting that its current policy was less restrictive and that it could be cautious.
Trump, however, had publicly demanded speed saying he knew interest rates “much better” than the central bank and “certainly much better than the one who’s primarily in charge of making that decision.”
Powell said Wednesday he had not been in with the Republican leader and declined to comment on his remarks, saying it would be inappropriate to do so, and defended his agency’s independence.
“We do not need to be in a hurry to adjust our policy stance,” he said, recalling that the successive cuts in September, November, and December were “appropriate in light of the progress on inflation and the rebalancing in the labor market.”
The FOMC had already emphasized in a statement that, as always, it would “carefully assess incoming data, the evolving outlook, and the balance of risks” when considering any changes.
“This is who we are, this is what we do. We study the data, we analyze how it will affect the outlook and the balance of risks and we use the tools to try to – given our best understanding, our best thinking – achieve our goals,” Powell added, stressing that there was no need to be “in a hurry.”
In the same cautious vein, he refused to predict the impact of Trump’s planned tariffs and immigration policies on the economy.
“We don’t know what will happen with tariffs, with immigration, with fiscal policy, and with regulatory policy,” he said adding that “I think we need to let those policies be articulated before we can even begin to make a plausible assessment of what their implications on the economy will be.”
Trump has threatened to impose 25% tariffs on Mexico and Canada starting Feb. 1 in retaliation for the flow of fentanyl and irregular migration across the border.
US Commerce Secretary nominee Howard Lutnick said Wednesday that the initial tariffs would not be implemented if those countries take action against drug trafficking, but warned that another round of levies would be decided by the end of March or in April.
Powell also declined to comment on whether Trump’s policy of mass deportations of undocumented migrants had already made it more difficult to find workers.
“We hear anecdotal reports (…) about businesses that are dependent on immigrant labor, saying that it’s suddenly gotten harder to get people, but you don’t see that in the aggregate data yet,” he said.
His appearance also offered mixed views on cryptocurrencies. While he said he’s not opposed to innovation – and believes banks are “perfectly able to serve crypto customers” as long as they “can manage the risks” -he did see value in a stronger regulatory framework.
Powell was speaking on the eve of the Bureau of Economic Analysis’ release of its first estimate of fourth-quarter and 2024 gross domestic product on Thursday. The latest data released on Dec. 19 showed that the US economy grew by 0.8% in the third quarter, a tenth more than previously estimated. EFE
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