Federal Reserve Governor Michelle Bowman issued a statement on Monday February 17th, discussing how she and the fed do not plan on decreasing interest rates again. In order for that to happen, Bowman said, there needs to be greater certainty that inflation will continue to decrease. This stance is likely due to some uncertainty of Donald Trump’s potential policies.
The Fed does not plan on decreasing interest rates
Throughout 2024, inflation steadily decreased. While it was still high, things were moving in the right direction. Because of that progress, President Donald Trump is ready to cut rates, and putting more and more pressure on the Fed to do so. “There is still more work to be done to bring inflation closer to our 2 percent goal” Bowman said. “I would like to gain greater confidence that progress in lowering inflation will continue as we consider making further adjustments to the target range.” Bowman went on to say that “We [the fed] need to keep inflation in focus while the labor market appears to be in balance and the unemployment rate remains at historically low levels.” The benchmark inflation rate is “now in a good place”, and the Fed wants to be patient before making any decisions.
By holding rates where they are, Bowman said “also provides the opportunity to review further indicators of economic activity and get further clarity on the administration’s policies and their effects on the economy.” Bowman and her team are planning on getting a full understanding of potential Trump policies and the impacts they would likely have. In her statement, Bowman also said “It will be very important to have a better sense of these policies, how they will be implemented, and establish greater confidence about how the economy will respond.”
Trump and Inflation
While the Fed is independent of political parties, President Trump is calling for lower interest rates. Trump wrote on his Truth Social platform, “We should lower interest rates, which would go hand in hand with upcoming tariffs!!!” Lets Rock and Roll, America!!!” Inflation in January was at 2.6%, down slightly from Decembers 2.8%. While that’s progress, many are not happy as forecasts expected inflation to be lower than 2.6%. Trump blames the Biden administration for such high inflation, but Biden supporters state the part of January’s economic situation also falls on Trump. With inflation being higher than expected, there is more pressure on the Fed as inflation is the key goal for 2025. To counteract inflation, the Fed is planning on discouraging unnecessary borrowing and spending until they get a better idea of what Trump plans for 2025 and the rest of his term.
It’s still a question mark whether interest rates will change in 2025. To stay up to date on all financial news, be sure to keep reading here on Due.com.
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