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Economic uncertainty is why Trump wins his war with the Federal Reserve

Yet, this long-awaited political decision would be far less the result of the President's unprecedented public assault on the Federal Reserve, including the demand not to "blow up" than the product of tremendous uncertainty caused by Trump. the improper commercial war of the administration with China and other countries which has weakened global growth and reduced investment.

Powell and other governors of the Fed have already telegraphed that they are planning to keep going down when they hold their regular two-day meeting next week is a reversal of previous plans for a steady rise in interest rates this year.

"It is easy to explain the Fed's support with other factors other than Trump's talk," said Kevin Bergget, an economist in the Monetary Policy Analysis. "He will be right or will get what he wants at one point, but not because of pressure but because things have evolved in that way."

Central bankers around the world, including the United States, are also struggling to understand why inflation has remained subdued by forcing employees to move to lower interest rates to overcome the economic turmoil.

The Federal Reserve drastically shifted its trajectory to fix interest rates as Powell assumed its role as chairman in February 201

8. As a result of the stagnation of interest rates in the country, the central bank began moving towards a gradual increase against the backdrop of signs of a stronger US economy. Officials pointed out a slow rise in wage growth and inflation and the booming labor market.

But over time, the US economic picture has begun to deteriorate, as the fiscal stimulus from Trump's tax cuts for 2017 and the mass bill on spending has shrunk, and the administration has made billions

. , which we saw in the second half of last year, really changed the picture, "says William Foster, vice president and senior credit officer at Moody's Investors Service. Transfers of messages

The plans the Federal Reserve made in December to continue the gradual rise in prices in 2019 also worried investors by triggering a market sale as they feared the Fed rejected the potential impact of the trade war with China, and wondered: "How bad can that be?" , "This eventually left the market in a way that he thought the Federal Reserve could speed up the recession."

Until his next meeting in 1965, Fed Powell began sending another Wall Street message, assuring investors that he would not go on with further price increases if it was not certain they would not hurt the recovery.

"The Fed, in my opinion, always pays too much attention to the stock market," says Douglas Holts-Eaqin, president of the American Action Forum, an independent economic center. "They do not have to pay zero, but they pay more than zero and the president is obsessed with him, and he calls the Fed, and this feedback is bad from the point of view of policy fundamentals."

But the case of reducing interest rates grew stronger after the politicians met in May at the time, it seems that trade tensions finally settled between the United States and China, and there are signs of welcoming global growth

Then this trajectory has changed sharply. Negotiations between the two largest trading partners in Bulgaria, the world has collapsed and signs of delays have started to appear in Europe and China, and as long as the negotiations between the two countries have recently resumed, they are far from achieving any resolution

Powell has deliberately tried to avoid justifying Fed interest rate cut directly on the President's trade wars, broadly pointing to a weakening of global growth and inflation are struggling to meet the 2% target of the central bank. He also tried to make it that the Federal Reserve, along with other central banks around the world, should act sooner rather than later to overcome a downturn. "If you see a weakness, it is better to get in earlier than later," Powell said when appearing before the Foreign Affairs Council at the end of June. "I think most central banks would like to act preventively and not allow for a downturn to accumulate, in a sense, the thought that it is an ounce of prevention costing half a pound of cure." Krsna Gucha, who heads the central bank's policy and central bank policy as Evercore ISI's vice president, says central banks today know they have far fewer opportunities to react with interest rates historically low, coupled with low inflation. The federal funds rate, which affects the cost of credit cards, mortgages and other loans, varies between 2.25% and 2.5%.

"Since you have a limited amount of ammunition, you do not have to wait until things get too bad," said Gucha. "You must be ready to act early, to act aggressively, to act preventively, even when it is mostly due the dimensions of the risks and not the economic weakness that actually materializes and is in a concrete form because you will have a greater impact.

Investors will remain on Powell's announcement on Wednesday, listening to the expectation of a second cut later this year and what the Fed plans next. Markets left last week after New York President Fed John Williams delivered a speech in which central banks began to act more aggressively and take precautions based on 20-year history. Investors interpret its remarks as a case for a possible reduction of 50 basis points, which is a rather unlikely outcome.

However, not all politicians still agree with Powell's plans. Boston Fed Chairman Eric Rosengrun told CNBC last Friday he was not about lowering interest rates next week, saying the economy is showing no signs of being needed at this time. Others, like St Louis's President James Bullard, have already called on politicians to make the so-called "insurance" to reduce the potential weaknesses in the economy. "Commercial uncertainty was relatively low," Bullard said in an exclusive interview with CNN's Julia Chatterley on First Move. "The president moved it to the frontal burner, and now I think the trade uncertainty is high and I do not see this coming down soon."

CNN Lydia DePillis contributed to this report.

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