Trump grumbles the Fed is losing a race with Europe to cut interest rates. Is he right?

It is not expected that the Federal Reserve meeting for this week will pack a lot of drama.

With uncertainty about the influence of President Donald Trump’s tariff on inflation and the economy is still high, the Federal Reserve is expected to leave the main interest rate without changing a fourth consecutive meeting. Economist Michael Ferroli of JPMorgan Chase says that it may be up to be expected to reduce only one rate this year from two due to inflation concerns.

It is also a very good bet that will reach the fireworks after the Federal Reserve announced its decision, assuming that President Donald Trump wore it and the Federal Reserve Chairman Jerome Powell as he has repeatedly did in recent weeks.

Trump has called for a decrease in federal reserve rates to a decrease in intense decline – a strategy that usually exposes the economy and the stock market – noting the campaign to cut the aggressive prices of the European Central Bank during the past year.

Trump wrote in a post on social media on June 5, after a disappointing appreciation for job growth in the private sector in May by the ADP salary processor on June 5, after a disappointing assessment of job growth in the private sector in May by the ADP salary processor: “It is too late”, Powell must now reduce the rate. “It is incredible !!! Europe has reduced nine times! “

The European Central Bank, or the European Central Bank, reduced its standard price seven times at the time of Trump’s publication, but cut it again the next day.

Does Trump have a point? Does the approach to waiting and continuous vision in the United States reserve puts the United States in an economic position compared to the eurozone?

Simply put, does the Federal Reserve lose a global race with the European Central Bank to reduce interest rates?

somehow. But not really.

The Federal Reserve cut off its main average point in late last year after a decrease in the high inflation associated with the epidemic, but it was temporarily stopped because it is expected to see the effect of Trump’s tariff on inflation and economy.

The central bank reduces prices to enhance the slow economy and helps prices or keeps them high for a longer period of inflation. But Trump’s tariff is an unusual dilemma for Federal Reserve officials because it is expected to raise consumer prices and hinder growth by eliminating the power of family purchase.

Meanwhile, the European Central Bank has steadily reduced its record price by two total points during the past year, with inflation in the euro area, while its economy remains anemia.

This leaves its main average by 2 %, and more than 2 degrees Celsius less than 4.25 % to 4.5 % to 4.5 % and between the largest gaps between the regions in modern memory.

While Trump did not explain last week the reason for his grief from the large gap in the rates between the United States and the euro area, it was more specific in the past.

In August 2019, after the Federal Reserve agreed to the first three discounts of three points, Trump called for a “at least” reduction, noting that the short -term German rate was negative.

“We are competing with many countries that have a much lower interest rate, and we must be less than them,” Tweet Trump at the time. He later added, “The most powerful dollar in history is very difficult for exports.”

Traditionally, high interest rates are enhanced by the dollar by attracting investments to American bonds and other fixed -income assets. However, this makes us more expensive for buyers abroad who must dowry to more euro, for example, to provide American goods, which harms American manufacturers.

On the contrary, rates generally weaken the dollar and strengthen US makers by making their exports cheaper for clients in foreign countries.

Low rates, of course, the economy is generally raised by shaving borrowing costs, consumers and stocks.

John Cannavan, the main financial analyst in Oxford, said about price cuts, including our export abroad.

More market -friendly interest rate policy may also mean a more attractive investment climate.

“Investors vary away from the United States, and the European Central Bank (on June 5) is likely to intensify,” said Nigel Green, CEO of Devere Group, a financial consulting company.

But there are some great warnings.

Despite the relatively high interest rates at the Federal Reserve, the dollar was weak against the euro and other currencies this year. This is because investors have escaped from American assets amid the uncertainty that Trump resulted in the foreground, external tariffs, and the estimates of the congress budget office that the Trump budget plan will add $ 2.4 trillion to the deficit over a decade.

“Although the European Central Bank has continued to reduce rates, we still see weakness in the dollar,” said Canaavan.

In other words, if Trump is looking for a softer dollar to enhance exports, he is already achieving this goal with his economic policies.

Jonathan Milar, senior American economists in Barclays, said the discounts in the Federal Reserve can reduce Greenback more.

But he added, “It is not very clear that if the Federal Reserve starts to reduce (prices) so that the dollar weakens. The dollar is already weak.”

“There are many other things,” he added. “Trade policy is the most important for the dollar. People are very concerned about risks.”

Although the weak dollar is studying exports, it has an opposite effect on imports, which makes foreign goods more expensive for retailers and American manufacturers.

“For us, it is not favorable,” said Andy Schneider, chief economist at BNP Paribas. “They have to pay more.”

Schneider said that since companies usually pass their costs for consumers, this means that this is still the highest cost of Americans who are already expected to fight with the additional definitions account.

Thus, if the Federal Reserve begins to reduce prices, it may collect the cost burden that American shoppers likely to face in the coming months.

CANAVAN, saying that fewer rates would enhance the economy on a large scale, which increases wages, and gives families what is the case in obtaining accurate foreign goods.

Aside from the effect on the dollar, Trump may refer to the euro area as a standard of how to deal with the United States for the interest rate policy while reducing inflation after the epidemic.

Economists said that the United States and the eurozone are in very different places.

In May, the total inflation was 2.4 % in the United States, and it is still 2 % higher than the FBI goal, and 1.9 % in the eurozone, slightly lower than the European Central Bank’s goal.

The American economy is stronger, which means that it needs less support than policy makers through price discounts. From the fourth quarter of 2023 to the fourth quarter of 2024, the American economy grew by 2.5 % compared to 1.2 % in the euro area.

Oxford Economics expects that the euro area will grow by 0.6 % this year, or about half of the expansion by 1 % that you expect to the United States

The bottom line: The European Central Bank has the flexibility in triming rates because its inflation is less and a more persuading reason to reduce because its economy is more fragile.

“American inflation was somewhat higher and American economic growth is significantly stronger,” Canaavan said, noting that the federal reserve also warns of price cuts due to the Trump tariff.

Kanavan said that although reducing the rate may raise the economy in the short term, it may lead to high inflation and the economy more in the long run.

“It is not really a race,” Kanavan said about the different interest rates in the United States and the euro.

“It is not necessary to be about the winners and losers,” Milar added.

This article originally appeared on Usa Today: Is Trump the right to lose the federal reserve with Europe to low rates?