The Federal Reserve is expected to hold interest rates on hold on Wednesday (July 30), six days after President Donald Trump renewed his demand that the US central bank cut borrowing costs during a rare presidential visit to its Washington headquarters.

The sharp rate cut Trump is seeking he has suggested cutting it from the current 4.25%-4.50% range to as low as 1% is highly inconsistent with economic conditions that have largely stabilized in the six weeks since the Fed's last meeting. Such a dramatic rate cut would likely increase inflation, according to many economists, and is more in line with what the central bank would do to lift the economy out of recession.

Trump's demand, which coincides with a campaign of attacks by the president and administration officials against Fed Chairman Jerome Powell, has had little impact on policymakers. Even proponents of rate cuts on the policy-setting Federal Open Market Committee (FOMC) prefer a more traditional quarter-percentage-point rate cut at this week's meeting, rather than the aggressive rate cuts advocated by the White House.

Even a moderate rate cut appears to be a minority opinion, so far limited publicly to two Trump appointees to the Fed Board of Governors, Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman. There is speculation that Waller and Bowman could voice dissent if the Fed keeps its benchmark interest rate unchanged on Wednesday for the fifth time since December.

More closely watched are any hints in the Fed's policy statement or in Powell's post-meeting press conference about a possible rate cut in September, a move consistent with current market prices for federal funds contracts and the median outlook held by Fed officials as of June, when they anticipated two quarter-percentage-point rate cuts by year-end.

The Fed is scheduled to release its policy statement at 2:00 p.m. EDT (1800 GMT), with Powell's press conference following half an hour later. (alg)

Source: Reuters