Despite the president’s pressure on Jerome Powell and the Fed to lower base interest rates, Donald Trump himself may seem to be proven to be the biggest obstacle to the move.
Since winning the Oval Office President Trump pushes Powell The Federal Open Market Committee (FOMC) has lowered interest rates time and time again, down from its current 4.25 level to 4.5%.
Despite the president’s anger, Powell has so far refused to do so. Indeed, analysts suspect that the situation will continue to exist in the face of the ongoing uncertainty of the fundamentals of the U.S. economy.
Tariff uncertainty FOMC cites the deterrence of cutting. FOMC’s reasoning is that the inflationary impact of economic sanctions is not yet clear. Keeping inflation is one of the tasks of the Fed.
Like this, Voting members may have decided they want to see how consumers and businesses react Tariffs are fully functional before lowering the base interest rate, as lower rates may lead to an increase in economic activity – potentially driving prices even higher.
Trump has hardly consolidated the U.S. stance on tariffs over the past week. After the 90-day pause announced after the April “Liberation Day” ends, The president once again postponed the deal’s deadline to August 1.
For countries that have not yet reached an agreement with the United States, the proposed tariff levels seem everyday, for example, the European Union will face 50% hike Just a few months ago, it was significantly higher than 20% of the threat.
Overnight, President Trump shared a series of letters sent to foreign governments, clarifying the sanctions they would face when they disagree with the deal. The president’s article on the Truth Society, while Laos and Myanmar will face 40% responsibilities, Japan and South Korea are now facing a 25% rate hike on all goods.
U.S. investors don’t seem excited about the Oval Office’s update. The S&P 500 fell 0.8% yesterday, Nasdaq Falling 0.9%, Dow Jones Jones fell 0.9%. The S&P Futures contract was flat this morning and listed.
Despite being shocked by Trump’s efforts to rebalance trade, Asia has maintained a relatively flat attitude in its deal this morning. The Nifty 50 and Nikkei 225 mapped out trivial improvements, while the Hong Kong Hang Sing Index improved more than that.
Europe may now be numb to threats from all over the Atlantic, and is also relatively calm with London’s FTSE and Germany’s DAX, marking minors.
UBS analyst Paul Donovan Arch suggested that foreign markets no longer believe in Trump’s threat: “When investors can understand the future retreat, it seems that efforts to analyze every Trump social media post are wasted,” he told clients in a note this morning.
The argument for delay
The trouble with Trump getting closer to home is that changing tariff expectations have no help on Powell’s cuts.
As Jim Reid of Deutsche Bank sent to wealth This morning: “After the post was sent, the president signed an executive order that effectively delayed the new tariff rate until August 1, extending the current 10% tariff rate and giving countries more time to meet the White House’s trade requirements.
“The president continues to say he is open to the deal, saying the August 1 deadline is ‘not 100% of the company’ and they can’t adjust it according to different ways.'”
Reid continued: “That was (White House adviser) Peter Navarro wrote in an alternative post that Chairman Powell’s policies are causing “acute financial pain” for American families and that if Powell does not voluntarily adjust the course, the board must act decisively to prevent further financial harm.’”
“On the surface, the latest tariff letters and the fact that the deadline appears to be pushing towards August 1 have extended uncertainty, which means that the Fed cuts in September will become more difficult unless there is strong evidence that the economy continues to deteriorate.”
Cut expectations
Instead, Goldman Sachs last night improved its outlook for S&P on all 3, 6, 6 and 12-month forecasts, up +3% (to 6400), +6% (to 6600) and +11% (to 6900).
The Fair Team believes: “More than we had previously expected, the largest stocks’ continued basic strength, and investors are willing to support our revised 22x 22x S&P 500 index forecast (from 20.4x) (from our previous 20.4x). Our previous index target was 5900, 61100, 6500 & 6500, with a sustained basic strength than the previous basic strength.
“Our economists revised Fed forecasts call for three sequential 25 bp cuts starting in September this year, followed by another two quarters of cuts in 2026,” they added.
Here is a snapshot of the action before the opening bell of New York:
- S&P was flat this morning.
- The S&P 500 lost 0.79% yesterday.
- South Korea’s Kospi rose 1.81% this morning.
- Hong Kong’s Hong Kong rose 1%.
- China’s CSI 300 grew by 0.84%.
- Japan’s Nikkei 225 rose 0.26%.
- The UK’s FTSE 100 is flat in early trading.
- Bitcoin price is $108K.
- The Stoxx Europe 600 dropped slightly in early trading.
