Fed ignores Trump plea for rate cut of 1%

The Federal Reserve has dismissed Donald Trump’s call for a cut in interest rates to help the US economy.

The US central bank left its benchmark rate in a target range of 2.25%-2.5% following the latest policymaker meeting and maintained guidance that it was likely to remain on hold this year.

Its statement said that while some domestic and international risks had eased – inflation remained stubbornly low.

It pointed to an annual rate of 1.5% in its preferred measure when its target is 2%, with some of the weakness down to lower oil costs that were now leaving the calculations as global prices rose again.

Low inflation makes the prospect of a rate cut the most likely next move – to help stimulate price growth rather than depress it through a rate increase.

At a news conference, Fed chair Jay Powell admitted the path for rates was finely balanced.

Jerome Powell become chairman of the Federal Reserve in February 2018
Image: Jerome Powell become chairman of the Federal Reserve in February 2018

Earlier this year he shifted guidance away from the prospect of a rate hike, citing an easing in growth domestically, in China and in Europe.

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On Wednesday, the Fed offered a more upbeat view of the domestic economy, saying “economic activity rose at a solid rate” in April.

Mr Powell also highlighted stronger than expected indicators from China and said he was encouraged by reports of progress in talks to end the trade war between the US and the world’s second-largest economy.

US growth – last measured at an annual rate of 3.2% in the first quarter – is not fast enough for president Trump.

He used his Twitter account on Tuesday to demand a 1% rate cut, saying the US economy had “the potential to go up like a rocket” if only the Fed would slash rates and resume its post-crisis bond-buying programs to stimulate spending.

Mr Powell has consistently signalled that the Fed’s policy is immune from outside influence and remains independent.

Source: SKY NEWS

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