The Fed Is Doing Damage Control

In its latest statement, the US Federal Reserve has initiated its move away from a policy of constant interest rate hikes. Fed Chairman Jerome Powell said that the central bank would take a “patient” approach toward further interest rate changes. The Fed has also made it clear that the shrinking of its balance sheet could come to an end over the course of this year. Professor Friedrich Heinemann, head of the “Corporate Taxation and Public Finance” Research Department at the ZEW – Leibniz Centre for European Economic Research in Mannheim, comments:

“The Fed is adjusting its policy to the worsening outlook for the US economy. It would be wrong to interpret this as a sign of caving in to US President Donald Trump’s criticism of last year’s interest rate hikes. Nevertheless, Trump is one of the causes of the Fed’s turnaround. Trump’s policy is increasingly taking its toll on the US economy. The global trade dispute and the prolonged government shutdown over the border wall funding conflict are harming the US economy. The Fed is now doing damage control.”