In a tense and unusually divided meeting, the US Federal Reserve decided to cut interest rates by 0.25 points to a range between 3.5% and 3.75%. This is the third consecutive drop in the price of silver since September because fears of a deterioration in the labor market weigh more than fears of inflation.
“The Fed seeks to achieve a maximum employment rate and bring inflation down to a rate of 2% over a long period. Uncertainty over the economic outlook remains high. The Committee is attentive to the risks on both sides of its dual mandate and considers that low risks for employment have increased in recent months,” explained the organization through a note to justify its decision.
Powell attempted to make an effort to calm the waters and reach a consensus that would accommodate all types and minimize differences. The decision has three dissenting votes: Vice President Stephen Miran, Trump’s Trojan horse at the Fed, betting on a 0.5 point rate cut. On the contrary, the president of the Federal Reserve of Chicago, Austan Goolsbee; and Kansas Regional Fed Governor Jeffrey Schmid voted to stop the reduction in the price of silver.
The final meeting of the year also raises new economic forecasts and offers some clues about the organization’s roadmap for 2026. The organization upgrades its economic outlook for next year and only expects a reduction in types throughout the fiscal year. The institution calculates that the American economy will grow by 2.3% in 2026, five tenths more than forecast in September. The new forecasts indicate that the unemployment rate will remain stable at around 4.4% and that inflation will gradually decrease to 2.4%, tenths less than the previous calculation of the months.
Following the Fed’s decision, the euro revalued by 0.4% against the dollar and was exchanged for 1,167 greenbacks and Wall Street saw a slight increase. The S&P 500 industrial index increased by 0.3% in the average session.
The Fed is going through a period of turbulence. On the one hand, it suffers attacks on its independence under the harassment of the President of the United States, Donald Trump, and the head of the monetary institution, Jerome Powell, whom he accuses of delaying in reducing the types of interest. Trump insulted and harassed the Fed chairman, who called for a reduction. He has placed some of his pawns in the sine chamber of the central bank to impose deeper cuts. The Republican movement has exacerbated the lack of consensus and internal divisions within the Federal Reserve.
On the other hand, the institution finds itself in a difficult situation. We must choose between two opposing forces: persistent inflation that does not eventually fall to the 2% target and a labor market that shows symptoms of weakness.
Trump’s aggressive foreign policy does not contribute to giving visibility to an economy which, despite everything, is growing at a good pace, but leaves some unknowns. Economists are empathetic to the idea of talking about K-shaped growth. Because the technological sector’s dazzling investments in artificial intelligence (AI), as well as the growth of the markets, with records on the stock market, could hide another face of the struggling economy.
Furthermore, inflation is not stopping, with increasing pressure on the prices of energy and services. The latest official date so far has shown a slight return to 3%, with a trend that leaves the desired 2% the Fed is aiming for.
Amid this situation, the Trump administration is rushing to name a replacement for Powell, whose term ends in May. The president claims to have a trio of candidates, including Kevin Hassett, director of the Casa Blanca National Economic Council, and Kevin Warsh, former governor of the Federal Reserve.
“We’re going to consider a few different characters, but I have a pretty clear idea of who I want to be,” Trump assured this evening aboard Air Force One, where he has taken to chatting informally with journalists. Inverters are targeting Hassett, a favorite in analyst polls, according to Polymarket, giving him a 70% chance.
When reporters asked Trump last week if he had elected Hassett and he smiled a complacent smile, markets reacted warily. They fear that the favored candidate will be too complacent towards the Republican president and anticipate the president’s short-term desires based on the real needs of the economy; We believe this could encourage a sharp reduction in types and harm the Treasury and fixed income market. To try to dispel doubts, Hassett assured him that he would not want to be arrested by Nadie. The market reaction and Trump’s doubts reopen an unknown question about Powell’s successor when it seems that everything is decided.
The Federal Open Market Committee (FOMC), a growing name for the body that decides the direction of monetary policy, decided on a case-by-case basis. It has reduced the types of interests with less data than usual to carry out a rigorous analysis due to the government cierre that for 42 days, the mayor of history, remained without activity to the knowledge of public bodies in the country between October and November. The federal blockade has hampered data collection and delayed the publication of essential statistics for measuring the temperature of inflation or the job market. The federal agencies responsible for these statistics will release the latest shipment with incomplete data next week due to closeas it is called in English al cierre.
The Fed is still holding on to the decline in the price of its money, even though it’s only been a few weeks since it looked like it was going to blow at that December meeting. Then, Powell hinted at a comparison to provide insight that could put pause on reductions like: “What happens if you drive in fog?” Decrease speed. » But in just a few weeks, the feelings changed.
The crisis of inequality and the cost of living has permeated American politics. The job market is showing symptoms consistent with the flu. The parity rate increased in September to 4.4%, a historically low level, but a change in trend that worries currency officials. And while this month’s job creation was positive, 119,000 new jobs was the lowest level in September since the pandemic.
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