Statement
The Fed's independence is at stake

“This week, the Federal Reserve (Fed) faces a monetary policy decision whose significance goes far beyond economic indicators. President Trump has massively increased the pressure on the Fed in recent weeks and has repeatedly called publicly for interest rate cuts - with the clear expectation that monetary policy must flank his economic policy agenda. This form of political influence is unusually aggressive and is reminiscent of the 1970s, when the political independence of the US central bank under President Nixon was severely called into question. The Fed is therefore faced with a dilemma: if it continues to keep interest rates constant, political pressure from President Trump is likely to increase. However, if it lowers interest rates, for instance to counteract an impending recession, this could be seen as a loss of its institutional autonomy, regardless of the economic justification of a rate cut. This could result in a permanent loss of trust in the Fed by financial market participants with unforeseeable consequences for the US dollar.
Fed Chairman Jerome Powell has repeatedly emphasized that monetary policy decisions must be made independently and must be based solely on the economic situation. The current data continues to support a wait-and-see approach with unchanged policy rates: inflation has stabilized at a level of just over 2 percent since the beginning of the year, while the labor market has remained robust so far - despite high political uncertainty and a slight decline in GDP in the first quarter. In view of the economic fundamentals, a further interest rate cut does not appear to be necessary at present.
The Fed's expected interest rate decision today can be clearly justified in economic terms and the Fed should communicate this very transparently in order to strengthen its monetary policy credibility and counter political pressure. In an environment of growing political polarization and geopolitical tensions, monetary policy credibility is one of the most important anchors of stability for the US economy. At the same time, it must already start thinking about strategies for communicating interest rate cuts in the course of 2025 without jeopardizing credibility. The Fed's independence is at stake - defending it is more important than ever these days.”