Can Trump force the Fed to cut rates?

Fed will not cut interest rates next week...

Next week, the Federal Reserve will decide on key interest rates again. At first glance, the latest data suggests that the Fed will resume the rate cuts that have been on hold since the beginning of the year. The US economy contracted in the first quarter. At the same time, inflation measured by the Fed's preferred consumer price index (PCE) fell to 2.3% in March, which is not far from the central bank's 2% target.

Nevertheless, we do not expect the Fed to reduce key rates next week. The reported weak growth is likely to paint too bleak a picture of the actual situation. After all, the labor market in particular remains quite strong, as evidenced by the continued very low unemployment rate of 4.2%, and shorter-term indicators such as weekly initial jobless claims also show no signs of an economic slump. Furthermore, although inflation has fallen recently, private households' inflation expectations have risen significantly due to the tariff policy; unlike during the pandemic, they now do not expect only a temporary inflation spike, but rather a much stronger rise in prices in the long term.

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