Inflation does not disappear with the snap of a finger, and the US Federal Reserve (Fed) knows this well. Under the leadership of Jerome Powell, it juggles between rate adjustments and precautions to avoid an uncontrolled outbreak. However, despite these maneuvers, the results are difficult to convince. And as Donald Trump prepares to make his comeback, the debate on economic policies is intensifying. It is in this context that the Fed is preparing for a further rate cut, and opinions differ.
The Fed, between caution and pressure
The US Federal Reserve is preparing to take a further step towardsa rate cut, despite worrying inflationary signals. With key rates currently oscillating between 4.50% and 4.75%the institution could opt for a reduction of a quarter point which could change everything in December. This decision, expected by a large majority of investors, nevertheless arouses controversy.
Jerome Powell, Chairman of the Fed, is playing a balancing act. The American economy, supported by vigorous consumption, appears robust, but inflation figures cloud the picture. In November, the CPI index jumped to 2.7%recalling that the fight against rising prices is far from won.
Worse, producer prices have reached a peakdriven by factors like avian flu, according to the PPI index.
Faced with this complexity, economists call for caution. Diane Swonkchief economist for KPMG, warns against being overzealous:
“ We are still far from declaring victory in the war against inflation. »
Despite these warnings, Powell remains confident in the Fed's ability to manage the situation through a measured approach.
Key points of the situation:
- Inflation on the rise after an encouraging decline;
- US consumption stronger than expected, fueling growth;
- Debate around rates: prudence or economic stimulation?
- Opposition likely in Fed committee over expected cut.
The American economy in the eye of the storm Trump
The return of Donald Trump to the White House promises to shake up economic dynamics. With his proposed 25% tariffs on Canadian and Mexican importsthe ex-president could revive inflation. These protectionist measures, combined with lower taxes and deregulation, worry analysts.
For the Fed, this new context promises to be thorny. Trumpian policies, although favorable to growth in certain sectors, risk further complicate the mission of bringing inflation to 2%. Michelle Bowman, one of the Fed governors, emphasizes that inflationary risks are now more worrying than those linked to unemployment.
Such a situation could lead the central bank to revise downwards its ambitions for 2025both on rates and on its economic forecasts.
But the challenges don't stop there. Powell will also have to navigate a tense political environment, with a White House that could openly criticize its decisions. The Republican has never hidden his animosity towards the president of the Fed, whom he accuses of slowing down the economy. Between political pressure and economic uncertainties, the path promises to be winding.
Moreover, Donald Trump does not mince his words when accusing the Fed of slowing down the American economy. Jerome Powell, whom he himself appointed, appears reluctant to give in to criticism. However, the standoff between these two visions risks redefining the contours of American monetary policy in the years to come.
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