Recently the chairman of the Federal Reserve Jerome Powell has been thrown into hot water over his remarks regarding the monetary policy of the country and the reluctance of the FED to cut the rates before the end of the year. The strident stance of the top-banker is meant to distance the institution of the FED from the ongoing political struggles in Washington and more precisely Donald Trump’s recent comments, urging for the FED to become more accommodative and cut the federal fund rate.
Jerome Powell and other members of the MPC remain seemingly distant from the administration’s ongoing tribulations, out of fears that the FED’s involvement might ultimately derail the US economy from the path of economic growth and its primary targets -reaching the 2 per cent symmetric inflation rate and ensuring maximum sustainable employment rate.
The US labour market is currently performing exceptionally well, and the numbers have been more than encouraging, however, the real question before Jerome Powell and his colleagues is whether the FED would be able to accommodate the current rate of development and prevent any extreme distortions in the overall employment.
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In the event of a sudden and unexpected rise in the unemployment rate from the current 3.6% level, it would become increasingly difficult for the FED to continue defending its stance. In this scenario, a possible rise in unemployment would dramatically increase the chances for cuts in the funds' rate over the next period.
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