Investment director at Sampension does not believe that continuing to maintain interest rates will be popular with Trump.
The US central bank is maintaining interest rates as expected, the central bank, also known as the Fed, said in a press release on Wednesday. The benchmark interest rate is thus still in the range of 4.25 percent to 4.5 percent.
“Although fluctuations in net exports have affected the figures, recent indicators suggest that economic activity has continued to grow at a solid pace,” the central bank writes in the press release.
The Fed adds that the unemployment rate remains low and labor market conditions are solid, while inflation is still somewhat elevated.
Henrik Olejasz Larsen, investment director at Sampension, calls another interest rate hike something that does not sit well with the White House.
“Trump has criticized the central bank governor, Jerome Powell, several times since his inauguration for holding back on interest rate cuts,” he says in a written comment to Ritzau, adding:
“Therefore, we must also expect, almost with a government guarantee, that today’s interest rate announcement will give rise to new criticism and demands for interest rate cuts from the Trump camp.”
The Sampension CEO points out that the attacks from the White House against the central bank have created concerns among investors about the bank’s independence:
“By maintaining interest rates, Powell and the Fed are also sending a signal that they will not be pressured by the US administration, which may help to calm the markets in that regard.”
The same tone is echoed by Las Olsen, chief economist at Danske Bank. He points out that by maintaining the interest rate, the bank continues to resist pressure from Trump. According to the chief economist, it is, among other things, Trump’s own policies that stand in the way of interest rate cuts.
“There are concerns that tariffs will cause inflation to rise, that stopping immigration will lead to a shortage of labor, and that an even larger budget deficit will overheat the economy,” says Olsen in a written comment to Ritzau.
Updating…
Ritzau
