The following is a report from the Associated Press.
After two weeks of intense political and legal scrutiny, the Federal Reserve will seek to make this week’s meeting about interest rates as straightforward and uneventful as possible, though President Donald Trump probably still won’t like the result.
The central bank’s interest rate-setting committee is almost certain to keep its key short-term rate unchanged at about 3.6%, after three straight quarter-point cuts last year. Fed Chair Jerome Powell said after December’s meeting that they were “well positioned to wait to see how the economy evolves” before making any further moves.
When the Fed lowers its short-term rate, it can over time influence other borrowing costs for things like mortgages, auto loans and business borrowing, though those rates are also affected by market forces.
This week’s meeting — one of eight the Fed holds each year — will be overshadowed by the bombshell revelation earlier this month that the Justice Department has subpoenaed the Fed as part of a criminal investigation into testimony Powell gave last June about a $2.5 billion building renovation. It’s the first time a sitting Fed chair has been investigated, and prompted an unusually public rebuke from Powell.
Now, Powell will have to shift from a dispute with the White House to emphasizing that the Fed’s decisions around interest rates are driven by economic concerns, not politics. Powell said Jan. 11 that the subpoenas were “pretexts” to punish the Fed for not cutting rates as sharply as Trump wants.
Powell will be “under even more pressure to underscore, ‘everything we’re doing here … is all about the economics,’” said Claudia Sahm, a former Fed economist and chief economist at New Century Advisors. “‘We didn’t think about the politics.’”
Michael Gapen, chief U.S. economist at Morgan Stanley and also a former Fed staffer, said that despite the scrutiny, the Fed can be expected to consider its interest rate policies like it always does.
