US President Donald Trump’s open attempts at glaring the Federal Reserve down into rate cuts notwithstanding, it looks unlikely that America’s central bank will oblige as its two-day monetary policy review begins on Tuesday.
Inflation is still above the Fed’s 2% target and could rise more as the economy gains momentum on the back of past cuts.
The Fed’s last rate call, a cut, was clouded by economic data gaps in the wake of a government shutdown.
Data for recent months that’s now available shows an economy that hasn’t changed much since then.
This time, a rate cut seems unlikely, with some expecting the status quo to last till around mid-year.
Meanwhile, what shape US monetary policy formulation takes once Fed chair Jerome Powell exits that role in May is a matter of feverish speculation.
Trump is expected to announce a new chief this week.
If global markets detect an end to the Fed’s independence, as Harvard professor Gita Gopinath recently pointed out, it could spell a turning point for the dollar’s supremacy in the world’s financial affairs.
As a fiat currency, its credibility relies on that of the Fed’s.
A loss of it could eventually deprive the US of its cheap-credit privilege.