The Federal Reserve (Fed) will announce its decision on interest rates today at 14:00 ET (19:00 GMT), marking a critical moment for the U.S. economy. This announcement is the last one like it before the year is out. Analysts generally expect the Fed to reduce its key interest rate target to a range of 3.5% to 3.75%. If so, it’ll be the third rate cut in as many meetings since September. This decision is a positive step to encourage more borrowing and investment during a volatile economic outlook.
President Trump has intensified his criticism of Fed Chairman Jerome Powell, asserting that the central bank should have acted more decisively by cutting rates sooner. Trump responded with a torrent of insults, describing Powell as a “numbskull” and “not a smart person.” This exchange pretty much added jet fuel to any growing tensions between the White House and the Fed. On top of that, the President has repeatedly threatened to fire Powell, threatening the independence of the central bank.
The expected interest rate reduction will lower the cost of loans and other forms of consumer borrowing. It’s hard to overstate how much this move would increase economic activity. When the Fed cuts rates, consumer banks are the first to take notice. When doing so, they raise and lower their own rates, which affects everything from mortgages to credit cards.
As the Fed looks to make its final decision, it has some unique challenges to consider. A recent federal government shutdown compromised both employment and inflation data collection. Because of this, we now have a more incomplete picture of the economy than ever. “It’s difficult to recall a time when the Federal Open Market Committee has been so evenly divided about the need for additional rate cuts than the upcoming December meeting,” noted economist Michael Pearce, highlighting the uncertainty surrounding today’s decision.
To marginalize the role of the Fed in keeping prices, as well as unemployment, stable would be a mistake. With today’s unprecedented pressures, its decisions carry the weight of history. Economists emphasize that the Fed’s credibility as an inflation-fighter hinges on its ability to make decisions free from political influence. Recent comments from board member Stephen Miran hint that there are hawks at the Fed who support a more aggressive rate cut agenda. This oxygen feeds Trump’s demands for immediate results.
Miran, who has not resigned from his position despite taking a leave from his role as chair of the Council of Economic Advisers, represents a faction within the Fed that favors a proactive stance on interest rates. His outspoken support for even deeper cuts would be an added complication to the already tricky dynamics of the upcoming meeting.
Our own President Trump has made the attempts himself to fire Fed Governor Lisa Cook. He’s accused her of mortgage fraud, which serves to crank up the political temperature around the Fed’s decision making. These activities raise serious questions about the independence, integrity, and credibility of the Federal Reserve. They undermine its independence as it seeks to balance its mission amidst outside political pressures.