Meeting comes as economists brace for economic impacts of Trump policy decisions
The US Federal Reserve announced today that it will hold its policy interest rate steady in the target range between 4.25 and 4.5 per cent.
The decision comes as US economic data appears to show an economy on relatively strong footing, with GDP growth and employment remaining high. Inflation, however, has proven stickier than anticipated and remains above the Fed’s two per cent target rate.
The great unknown, according to many analysts, is in US government policy under US President Donald Trump. A number of Trump’s proposed policies such as blanket tariffs on Canadian, Chinese, and Mexican imports could have an inflationary effect on the US economy. It has been speculated that the Fed has skipped a cut at this meeting in order to protect against those possibly inflationary policies.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” a press release related to the announcement reads. “The Committee judges that the risks to achieving its employment and inflation goals are roughly in balance. The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.”
The Fed has also come under some degree of political pressure from President Trump on interest rates.
“I think I know interest rates much better than they do, and I think I know it certainly much better than the one who’s primarily in charge of making that decision,” said Trump last week, apparently referencing Powell.
The Fed’s decision also follows the Bank of Canada’s announced 0.25 per cent interest rate cut. This leaves US policy more than one per cent higher than Canada.
