In its most recent policy announcement, the Federal reserve chose to keep its base rate unchanged at 2.5 percent. In announcements before that, the Fed changed its expectations. The Fed switched course to making no hikes this year, which surprised investors. Earlier plans had aimed at two rate hikes.

Trump is pushing for a dovish move

The president Donald Trump, is not pleased with the current rate. He believes that a move towards a lower rate is warranted. He wants a dovish move to stimulate the economy, especially before re-elections. However, the Fed is not swayed by Trump’s pressure, as it sees no adequate reasons to move in either direction.

The current rate is a bit tight

Today, however, the head of St. Louis Fed Reserve, James Bullard, indicated that the current rate may be a bit restrictive. James Bullard said that given target inflation, the funds rate should be between 2.5 and 2.25 percent. He continued and said that it is still early for a move for the time being.

The Federal reserve usually gives cues to other central banks around the world with its monetary policy. A dovish move now may give the wrong signals to the financial markets. Nonetheless, medium term pressures may change the Fee’s position.