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13 hours ago
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ARTICLE AD BOX
Summary
The Fed's decision to keep policy rates unchanged reflects caution as the West Asia war's impact slowly unfolds. But more importantly, how will its stance shift under Kevin Warsh amid President Donald Trump's pressure to cut rates? The Fed’s credibility is at stake and the world will watch closely.
The US Federal Reserve kept its main policy rate unchanged on Wednesday as Jerome Powell presided over the rate-setting committee’s meeting for the last time.
The Fed is concerned about inflation, which has exceeded its 2% target and could rise further as the supply shock caused by the war in West Asia sends prices of goods and services soaring in the US and elsewhere.
Meanwhile, the US economy is humming along nicely, according to the Fed’s assessment, which has given it the confidence to wait for a clearer picture of the war’s impact to emerge. Powell has refused to give in to pressure from President Donald Trump to cut rates.
What will now be under watch is whether the Fed’s stance changes under Kevin Warsh, Trump’s nominee for Fed chair who is likely to win approval in the Republican-dominated Senate. Trump has said he would be disappointed if Warsh didn’t cut rates, although Warsh has asserted he will act independently.
To be sure, the Fed hasn’t altered its easing policy bias. But as the war drags on, the room for rate cuts is shrinking fast. Any hint that monetary policy is bending to political pressure will hurt the Fed’s credibility and the US economy.
English (US) ·