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The US central bank (Fed) concludes Wednesday a monetary meeting during which it should keep interest rates as is but confirm its intention to raise them later in the year despite the discontent of Donald Trump
It is in a rather unusual atmosphere that the Fed's Monetary Committee will meet on Tuesday for this regular meeting, without a scheduled press conference by President Jerome Powell.
Last week, President Trump broke with decades of tradition of respect for central bank independence by openly criticizing monetary policy.
"I'm not happy" about the monetary policy that is gradually raising interest rates "but at the same time, I let them do what they think is best," Trump said. He also hinted that the Fed was pushing up the dollar, hampering the competitiveness of US exports, the administration's hobbyhorse.
This White House criticism has brought to the surface memories of political pressure in the time of Richard Nixon or even George Bush Sr., but Treasury Secretary Steven Mnuchin badured Sunday that Mr. Trump "fully respects the independence of the Fed."
– Growth "sustainable" –
that second-quarter growth has swung back dramatically to 4.1 percent year-on-year, a four-year high, Mnuchin said the growth was "sustainable." "I do not think it's a phenomenon of two or three years, I think we are in a period of four or five years of sustained growth of at least 3%," he said.
" I think, alas, we have a president who does not believe in the independence of anyone, neither the judiciary, nor the Fed, nor the FBI … ", told AFP Alan Blinder, former number two of the Federal Reserve and currently professor at Princeton University.
"He sees America as a family business (…) and he is wrong," he said, adding that the presidential initiative was at risk to "make the life of the Fed difficult."
Randall Kroszner, also a former member of the central bank, is less alarmist. "(Fed) President Jerome Powell has said several times that being apolitical is in the DNA of the Fed" who should "ignore these pressures". "For now, it's an isolated shot, you have to see if it becomes a continuous drum roll," commented the professor of economics at the University of Chicago, referring to the comments of the occupant of the House Blanche
In the immediate future, the Fed should not raise rates – which it did in June – but wait until September. According to the evolution of money market instruments, 97.5% believe that overnight rates will remain unchanged at between 1.75% and 2%.
The Fed expects to raise them a further two times this year by a quarter of a percentage point if inflation settles durably around the 2% target (2.3% in May, according to the PCE index.)
– Trade Uncertainty –
The central bank is also cautious about the uncertainties created by trade tensions between Washington and its trading partners, particularly China, Canada, Mexico and Europe.
"For the moment there has been almost no macroeconomic impact of trade disputes," Randall Kroszner said.
But according to the latest Beige Book of the Fed, a report of economic conjuncture, the concern spreads among the industrialists of the country vis-à-vis the tariffs applied on the Chinese steel which push up the prices. 19659002] Faced with reprisals from Beijing, the Trump administration even had to subsidize farmers by promising to buy $ 12 billion worth of their production, including soybeans, to make up for the losses.
Jim O'Sullivan from High Frequency Economics, "there's no reason the Fed sends this week a different signal" from the one Jerome Powell gave Congress two weeks ago. He reiterated that a gradual rise in rates was still on the agenda.
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