For the first time since the pandemic, the world’s most powerful central bank announced a rate cut. The drop was 50 points, twice what most analysts had expected.
The Federal Reserve of North America announced this Wednesday a cutting interest rates of the dollar, the first since the pandemic and after interest rates remained at two-decade highs for more than a year. In fact, the central bank surprised with a rate cut of 50 basis pointswhen most analysts admitted it would be only 25 points.
The cut in interest rates, by a range between 4.75% and 5.00%, appears after Jay Powell, Chairman of the Federal Reserve (Fed)having indicated at a recent symposium (Jackson Hole) that the central bank is, at this stage, more concerned about signs of fragility in the labor market than the threat of inflation, which was estimated at 2.5% last month – a figure not far from the 2% target.
Still, Republican candidate for the upcoming election, Donald Trump, said before the decision that announcing a rate cut – whether larger or smaller – would be a mistake. Lower interest rates so close to the election (in November) “It’s something that they [os responsáveis da Fed] They know they shouldn’t do it”said Trump, who, let us remember, was the one who appointed Powell to head the Federal Reserve during his presidential term (2016-2020).
Trump already stated, several weeks ago, that if he is elected President again he will defend that the White House should have “a word to say” in the Federal Reserve’s monetary policy decisions. This is a position that clashes with the view that central banks should be independent of political power, since this is the most effective model for controlling inflation and stimulating the economy.
Once the interest rate decision has been announced, Jay Powell will soon hold the usual press conference in which the Fed chairman will justify the chosen option and, potentially, give some clues about the most likely path to follow in the coming months. A path that will also be important for the eurozone and the European Central Bank, given the synchronicity that central banks seek to have, as far as possible, in their decisions.
“Que sera, sera…” But the ECB is not expected to lower interest rates again until Christmas.
Source: Observadora
