Fed stays the course on fighting inflation and proving its independence: CEI analysis

The Federal Reserve has decided to not move interest rates, an expected decision that signals the Fed’s independence and its continued fight against inflation. CEI senior economist Ryan Young and monetary policy analyst Steve Swedberg provides their analysis of the Fed’s decision.

CEI senior economist Ryan Young:

“The most important part of the Federal Reserve’s interest rate decisions are not the interest rates themselves. It is who makes those decisions. Is the Fed independent, or does it take orders from the president?

“That is at least part of why the Fed held interest rates steady today. They are signaling their independence.
“President Trump wants sharply lower interest rates and stimulus as far as the eye can see. So far, the Fed has not done what he wants. That is why Trump ordered investigations into Lisa Cook and Jerome Powell; it clearly wasn’t on the merits.

“America is a country built on institutions such as limited presidential power. This is currently a multi-front battle that goes far beyond monetary policy. So far, the Federal Reserve is holding ground in its field.”

CEI monetary policy analyst Steve Swedberg:

“Despite the Fed holding interest rates steady, political pressure on the central bank has tested global confidence in the dollar. President Trump’s calls for lower rates to boost consumer spending have raised concerns about the Fed’s independence. Investors value stable, predictable monetary policy because it allows them to plan for returns and manage risk. When Fed independence is threatened, the uncertainty makes investors less willing to hold dollar-denominated assets, thereby putting downward pressure on the dollar.

“Ironically, this depreciation works against the administration’s goal of making everyday goods more affordable. A weaker dollar makes imports more expensive, which feeds into higher consumer prices and inflation while reducing the purchasing power of everyday Americans.”