As the FED prepares to announce its interest rate decision this evening, it is in an historically intense political pressure environment.
U.S. Treasury Secretary Scott Bessent stated in a press release before the meeting that a rate cut by the FED today is not expected. Bessent also reiterated that the FED needs to 'show a little imagination,' emphasizing that it has made mistakes regarding inflation, particularly through tariffs.
Bessent delivered important messages regarding trade talks in his statements. He mentioned that if an agreement cannot be reached by August 1, negotiations could continue afterward. Calling for people not to panic before August 1, Bessent said they expect a busy August and noted that the trade agreement is still incomplete. The Treasury Secretary also described former President Donald Trump's policies as 'incredible,' stating that the U.S. economy has regained confidence and is gaining momentum.
Since the last meeting in June, Trump and his team have increased pressure on the FED to cut interest rates. Particularly, the cost overruns in the renovation project of the FED building have become a main point of criticism from Trump's team toward the central bank. Although Trump has stated that he will not remove FED Chairman Jerome Powell, Powell's position may be at risk. Against the backdrop of renovation discussions, Powell's messages this evening will be of critical importance for both the markets and the FED's independence.