CoinVoice recently learned from Nick Timiraos, a reporter for The Wall Street Journal known as the Federal Reserve's mouthpiece, that 'currently, the goal of the Federal Reserve in setting interest rates is not to help manage federal borrowing costs, but to maintain low and stable inflation in a strong labor market. The Federal Reserve is holding steady because it sees risks in whatever measures it takes. After four consecutive years of inflation above the target level, it is now close to the Federal Reserve's 2% target but has not fully reached it.
An early interest rate cut by the Federal Reserve could trigger inflation again. Many economists expect that businesses will raise prices due to increased import costs, and cutting rates may stimulate more economic activity at the wrong time. The Federal Reserve does not want a situation where, a year later, the inflation rate jumps back above 3% and stays at that level.
The long wait times, along with economic uncertainty and rising costs due to tariffs, could squeeze company profits, leading to layoffs and economic recession. The recent slowdown in the real estate market indicates that rising borrowing costs remain a significant obstacle in rate-sensitive sectors of the economy.
The Federal Reserve has more reasons to maintain interest rates because the Middle East conflict could reverse the recent decline in energy prices. This uncertainty alone reinforces the case for caution, as it adds one supply shock on top of another driven by tariffs.
