European Central Bank's proposed budgets for the fiscal years 2000 have been scrutinized by the Commission, as outlined in Table 2.
In a recent Federal Reserve (Fed) meeting, the central bank announced a 25 basis point interest rate cut, with a divided vote. This decision, and the events leading up to it, have sparked discussions among economists and financial analysts about the future of the US economy.
Johannes Mayr, Chief Economist at Eyb & Wallwitz, noted that the Fed's diagnosis suggests a slowdown in employment growth and easing price pressure, indicating waning economic momentum. This observation was echoed by Thomas Gitzel, Chief Economist of VP Bank, who added that higher tariffs have moderately increased price inflation.
The interest rate outlook, or 'Dot Plot,' shows only an additional step this year compared to the June meeting, with no change in the projected rate cut in 2026. However, the risk of significant interest rate cuts could increase if Donald Trump appoints a candidate of his choice to the Fed's top seat next year, as suggested by Thomas Gitzel.
One such candidate is Stephen Miran, who is allegedly candidating as a Fed governor in 2026. Known as Trump's dovish preferred candidate, Miran hopes to occupy the Fed chief position vacant from May 2026. New Fed Governor Miran made a splash with a 50 basis point vote, the sole dissent, indicating who he may owe his position to and who he may want to please.
The Fed is caught between the unexpectedly sharp deterioration in the labor market situation and the continued threat of an inflation surge due to the US government's trade policy, according to Elmar Völker, Analyst at LBBW. This delicate balance, often referred to as the Fed's dual mandate, could present a complex task for the central bank.
Carlos de Sousa, Portfolio Manager at Vontobel, predicts that the Fed will face a challenging task of balancing its dual mandate due to a weakening US labor market and persistently high inflation. Ulrich Kater, Chief Economist of DekaBank, states that the Fed's interest rate cut is macroeconomically justified and was expected by the capital markets.
However, some analysts, including Elmar Völker, consider a cautious approach to further interest rate cuts appropriate given the inflation risks. Völker also suggests that the risk of monetary policy mistakes is growing in the current situation. Bernd Weidensteiner, Economist at Commerzbank, notes that the Fed's decision for an interest rate cut was nearly unanimous, with only the newly appointed Fed governor Miran advocating for a stronger cut.
Somewhat surprisingly, the FOMC raised its growth and inflation forecasts for next year, according to Johannes Mayr. Despite this, Michael Heise, Chief Economist of HQ Trust, argues that the interest rate cut is justified despite the inflation target being exceeded due to time lags in the effects of monetary policy and the need to counteract a further cooling of the labor market.
In conclusion, the Fed's interest rate decision and the events surrounding it have set the stage for a complex economic landscape. The future of the US economy will depend on how the Fed navigates this landscape, balancing its dual mandate and avoiding potential monetary policy mistakes. Investors are likely to continue diversifying and turning away from the US due to increasing risks concentrated on the largest developed nation.
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