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- The White House has been stepping up pressure on the Federal Reserve to lower interest rates.
- The Fed, however, has signaled it will leave interest rates unchanged this year. Its latest decision is due Wednesday.
- While the economy is expected to slow, it remains stronger than expected by many measures.
The Federal Reserve is expected to leave borrowing costs unchanged Wednesday at the end of a two-day policy meeting even amid increased pressure from the White House to lower them.
Officials on the Federal Open Market Committee have signaled they are unlikely to change interest rates again this year. Yet President Donald Trump and administration officials have repeatedly called for a rate cut as they seek to offer the economy a boost ahead of the 2020 elections.
On Tuesday, Trump wrote on Twitter that the economy would “go up like a rocket if we did some lowering of rates.” He also called for the return of quantitative easing, a stimulus program that injected trillions of dollars into the US economy after the 2008 financial crisis.
The Federal Reserve is meant to operate independently of political interests, but the president has long lashed out against policies he views as a hindrance to growth. Those broadsides have grown louder in recent months.
“Mr. Trump has been attacking the Fed’s actions with more vitriol than any previous president in memory,” Steven Rattner, a Wall Street financier who was an adviser to the Obama administration, wrote Monday in a New York Times op-ed article.
While officials have since signaled that a three-year hiking campaign could be coming to an end, economists say it’s unlikely that they would move toward a cut anytime soon. Only two of 39 economists recently surveyed by Bloomberg forecast lower interest rates in 2019.
As activity around the world slows and the stimulating effects of tax cuts and government spending fade, the economy is expected to cool in the coming months. Inflation readings have also come in well below a set target of 2%, an issue Federal Reserve Chair Jerome Powell will most likely touch on Wednesday at a press conference.
But the economy remains stronger than expected by many measures. Gross domestic product in the first quarter came in far above estimates last week, and the unemployment rate has held near its lowest level in five decades.
“In demanding aggressive cuts in the Fed funds rate, and a resumption in quantitative easing at a time when economic growth remains solid, the administration is only further demonstrating that it has only the political self interest of Mr. Trump at heart,” said Menzie Chinn, an economist at the University of Wisconsin at Madison.
The Fed most recently increased the benchmark interest rate by a quarter percentage point in December, bringing it to a target range of 2.25% to 2.5%.
