
Divisions Emerge in the Democratic Party Over Trump's Immigration Law
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The Federal Reserve, the central bank of the United States, is facing increasing pressure to lower interest rates as it holds its first meeting since Donald Trump returned to the presidency. Trump, a long-time advocate for a low-interest-rate policy, has made his stance clear shortly after his inauguration.
The Fed's current interest rate is set between 4.25% and 4.5%, and many analysts predict that the central bank will maintain this rate during its upcoming meeting. The announcement regarding any changes to the interest rate is scheduled for release at 2 PM ET on Wednesday.
During his previous term, Trump frequently criticized the Federal Reserve and its Chair, Jerome Powell, urging for rate cuts. In a recent address via video link at the World Economic Forum in Davos, he stated that a drop in oil prices should prompt an immediate reduction in interest rates.
The primary mandate of the Federal Reserve is to control inflation, targeting a rate of 2%. Recently, U.S. inflation rates have shown signs of acceleration, with consumer prices rising by 2.9% compared to the same month last year, marking a continued upward trend for three consecutive months. Economists warn that Trump's proposed economic policies may contribute to higher inflation, potentially limiting the Fed's flexibility to lower rates.
Trump's administration plans to impose extensive tariffs on goods imported from Canada, Mexico, China, and has even issued threats to the European Union. Such tariffs could lead to increased prices for U.S. businesses, further exacerbating inflationary pressures. Additionally, a potential mass deportation of undocumented immigrants might also affect pricing in various sectors, particularly in low-wage jobs within the service and construction industries.
At its last meeting in December, the Federal Reserve opted for a modest rate cut of 0.25 percentage points. For the current year, projections indicated an average interest rate of 3.9%, up from an earlier estimate of 3.4%. The Fed's latest forecast suggests a cautious approach, with only two slight rate cuts anticipated this year, contrasting with the more aggressive reduction strategy considered before Trump's election.
Former Cleveland Fed President Loretta Mester remarked that there is no compelling reason for an immediate rate reduction. She emphasized the necessity of substantial evidence indicating a decline in inflation before any decision is made.
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