Federal Reserve lowers interest rates for the first time in 2022.
The US Federal Reserve has announced a cut in interest rates for the first time this year, lowering the range to 4.0 to 4.25 percent. This decision comes amid a weak labor market and mounting pressure from President Donald Trump to stimulate the economy.
The rate cut is expected to provide more value for European tourists traveling to the US, as it will result in a stronger euro compared to the US dollar. The move also reduces the attractiveness of the US dollar, making it less appealing for foreign investors.
The decision was not unanimous within the Federal Reserve's Board of Governors. Only Stephen Miran, a Harvard-educated economist and Trump's ally who was recently confirmed as an interim member of the board, advocated for a larger cut in line with Trump's wishes. Senator Elizabeth Warren has accused Miran of being "Trump's puppet."
Trump has been attempting to influence the Fed's monetary policy through personnel debates, most recently initiating the dismissal of Fed Governor Lisa Cook. However, Cook successfully challenged Trump's move in a U.S. appeals court.
The Federal Reserve, despite Trump's repeated calls for interest rate cuts, prefers a cautious approach given the rising inflation. Lower interest rates make loans cheaper for businesses and consumers, which can stimulate the economy and create jobs. However, the Fed is also concerned about the increased risks on the labor market.
The labor market numbers in the United States have been disappointing recently, with the job growth figure for the 12 months up to March 2025 revised down by a total of 911,000 jobs. This has raised questions about the Fed's independence with Trump still in office, given his repeated pressure for interest rate cuts.
Meanwhile, Russia is struggling economically due to China's measures, which have isolated Russia by severing an important link with a neighboring nation. The Kremlin is also grappling with an auto crisis. In contrast, Germany has seen a world leader's plant shut down, and an insolvent glass manufacturer has been forced to close after over 90 years of operation.
The rate cut comes as Trump tries to appoint more allies to the Federal Reserve's Board of Governors. However, the Senate's confirmation of Miran does not guarantee that Trump will have a majority on the board. The question remains about the Fed's independence and its ability to make decisions based on economic conditions rather than political pressure.
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