The president of the Fed Jerome Powell, in Chicago, on April 16, 2025 (AFP / Kamil Krzaczynski)
The American Federal Reserve (FED) unanimously decided to leave its rates unchanged on Wednesday, saying that they are unable to predict where the American economy faced with the earthquake of new customs duties is going.
There are “so many uncertainties” around the repercussions of these new taxes on imports that the Fed prefers not to move its rates at the moment, said the president of the institution at a press conference.
“If the increases in customs duties that have been announced, this may result in an increase in inflation, a slowdown in economic growth and an increase in unemployment,” said Jerome Powell.
It would be for the Fed, he said, a “difficult scenario” to see unemployment increase at the same time as prices.
To curb inflation, a central bank generally increases its guiding rates, which guide the cost of credit for businesses and individuals.
On the other hand, if jobs are destroyed, it is supposed to lower them to give a boost to economic activity.
This status quo on interest rates (in a range between 4.25% and 4.50% since December) was widely awaited by the markets.
The New York Stock Exchange has evolved into a sawtooth, according to the comments of Mr. Powell, ultimately keeping the direction it had taken before the Fed’s announcement.
Around 7:10 p.m. GMT, the Dow Jones took 0.70%, the NASDAQ index fell 0.25%and the enlarged S&P 500 index grappled 0.12%.
– “change the situation, or not” –
Since the last meeting of the Federal Reserve in March, President Donald Trump has sparked an economic earthquake.
During what he himself nicknamed “Liberation Day”, on April 2, the American president erected a wall of new taxes on products imported into the United States.
Donald Trump has since partially reversed and promised “deals” with the major partners of the United States to lighten the bill. None has yet been announced.
-Customs duties are now much higher than before the start of its second term, and exchanges with China are almost stopped.
US and Chinese officials have an appointment during the weekend in Switzerland to lay the foundations for negotiation.
The conclusion of trade agreements could “change the situation significantly or not,” said Powell.
The central bank thus concluded two days of conclave with the cardinal principle to remain stuck to economic data and avoid any hasty decision.
Regular economic barometers show increasing nervousness, as well as business communications.
American growth from 2015 to 2025 (AFP / Elsa Rancel)
However, official indicators did not derail: 4.2% unemployment in April, 2.3% inflation over a year in March, slightly above the Fed target.
The GDP of the first quarter, published last week, nevertheless had the effect of a warning stroke, with a decline of 0.3% in annualized pace. The Fed has chosen to evacuate this data, insofar as it reflects above all a surge in imports over the period.
Companies and households had indeed sought to gain speed the entry into force of new customs duties.
Beyond this ultra -changing context, the Fed – and especially its president – face repeated criticism from Donald Trump, who wants to see the rates drop, which would have the merit of absorbing the impact of customs duties somewhat, at the risk of feeding inflation.
Presidential statements “do not affect our work at all,” said Powell.
“We consider, he added, always only economic data, perspectives, risk balance and that’s it. So that really does not affect neither our work nor the way in which we execute it.”
