Of Bloomberg Opinion’s editorial team

The US Federal Bank (Fed) resisted White House pressures last week and left its main interest rate unchanged. It was the right decision.

As President Gerom Powell acknowledged, the case of a reduction was a little stronger this time than in June -two of the Fed policy executives in one of the rare disagreements, voted in favor of reducing the interest rate by a quarter of the unit. At present, however, the patience in relaxing the “moderately restrictive” attitude of the Central Bank still makes sense.

As Powell explained, the Fed is fighting with conflicting information and increased uncertainty. Economic growth has slowed in recent months, the rate of recruitment has been frozen, and data published after the Fed decision showed that the unemployment rate increased in July.

Even so, inflation continues to run faster than the bank’s target for 2% (the inflation core was 2.8% per year to June) and is too early to say whether the new government duties will push the prices and unemployment rate of last month,

More clearer things in 6 weeks

In other words, there was no urgent need for a change of course. At the next Fed meeting, in six weeks from now, things will be clearer.

While investors did not expect immediate change in the policy interest rate from 4.25% to 4.5%, many hoped for a clearer message to decline next time. However, as Powell explained, it is impossible to know how to shift the calculation – if the risk of tariff prices will outperform jobs for jobs from a policy rate that is “slightly” higher than neutral. As things are, the Fed had no good basis to hint at what it could do next time.

Many investors assume that as soon as inflation is safely returning to 2%, with the full -time labor market, the policy rate can be reduced over time to 3% (the fed -in -law price for the “long -term period” today, so it is indirectly considered neutral). But they forget that policy makers disagree about what it actually means neutral: in their latest objective, the range of opinions ranged from 2.5% to 3.9%. Time will show how far above the neutral interest rate is really the current interest rate.

What matters is that, at present, demand is sufficient and unemployment is low. This makes the White House’s view – that high interest rates on the economy and that the interest rates reduce by three percentage points – enigmatic.

Certainly, in the medium term and long -term interest rates is higher than before, making it more difficult to buy houses and cars, putting over -indebted households and discouraging investment. But the crucial point is that a lower policy rate will not necessarily help and could easily aggravate things.

The next two months will reveal more about what’s going on in the job market and to what extent the highest tariffs will increase prices. At the moment, the Fed crisis seems right and the government would be wise to keep its criticism under control.