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What does Trump’s second term for Washington, Business and the world mean
Last week was a special test for J Powell. Donald Trump resumed his criticism of the chairman of the US Federal Reserve, so that he could not cut interest rates rapidly by describing it as a “stupid person”. On Wednesday, the US media reported that the President may nominate a new chair well before the Powell period ends in May 2026. The White House later stated that no announcements were “adjacent”, helping to eliminate sales in dollars. The rumors around his job, starting with other members of the Fed’s rate-setting committee, began a week.
If Trump wants to cut the rate, the agenda of their intervention and chaotic policy is not helping their cause. For the beginning, the President should reveal his successor well before ending his term, then it enhances the worrying possibility of a “”.Shadow chair“Which can indicate a more dovish direction at rates from the sideline. It will prevent confusion in the markets, and distort the transmission of monetary policy. Right now it is also running speculation of looseness in future policy stance. As recent market moves have shown, which weakens the dollar and increase the case for high rates.
Then there is an immediate uncertainty around the President’s tariff policies. In his meeting in mid -June, Fed kept rates at the rate of 4.25 to 4.5 percent. But its policy makers were divided where they should go further. Recently, including a two-rate-sector-christopher waller, a prominent candidate to make Powell a success said that the Fed should consider the cut cut as soon as the next month. Finally, the President’s reading of US inflation has only increased slightly since the President’s tariff declarations of April 2. High rates are hindering growth. Credit cards are at their highest level in over a decade and the annual wage hike on job posting is the lowest in four years.
But Powell’s caution is sensible. Statistics on Friday showed that the annual growth in the core personal consumption Expenditors Index in May – Fed Federation’s favorite measure – increased to 2.7 percent. In fact, it is too early to judge the effects of tariff on inflation. First, American businesses are still working through imported reserves. Price pressure from the existing tariff may not appear in the number of inflation for summer months. The fed will then understand how high duties are passing through supply chains to understand that it will be in a better position.
Second, Trump’s entire tariff package is not yet hit. It is not clear what duties will be performed beyond July 9, when the time limit for the President’s trade partners to resume its “liberation day” tariff. When those levy are effective, they will further the prices. The administration is also reducing additional sector-based tariffs. Other value pressure can also be constructed. Global oil prices are in touch with the delicate ceasefire between Israel and Iran. Trump’s tax deducting “Big Beautiful Bill” can increase the pressure of further value.
If tariffs, pass-the-three, and wider value jerks are surprised to the consumers, there is a risk of continuous increase in inflation-only one jump in the price level. Ultimately, Americans have experienced the upper-targeted price increase for four years, and year-to-year inflation expectations are high. But if the implementation of tariffs is delayed and uncertainty, the demand may fall rapidly and thus the matter can increase the case for the cut.
For now, placing rates on holding seems to see the safest option given all uncertainty. But this means that the risk of policy mistake is high. If there was more clarity of tariffs in the central bank and more clarity at the time – and the President’s broad agenda – it would soon be in a better position to detect the risk of cut rates. The President would do well to realize that the dilemma of fed faces is largely one of his own.
