The Fed and Trump... A Conflict at the World's Expense
News:
The Federal Reserve Board (the central bank) decided on Wednesday to hold interest rates steady for the fifth consecutive time, despite continued pressure from President Trump to lower them.
The Board said that interest rates would be maintained at a level between 4.25% to 4.5%, noting that "inflation is still a little high," while indicators point to a slowdown in economic activity growth in the first half of 2025.
For his part, Federal Reserve Chairman Jerome Powell said on Wednesday that it was too early to say whether the bank would cut interest rates in September, as financial markets expect. (Al Jazeera Net, 07/30/2025, with modifications)
Commentary:
The federal interest rate is the main tool for controlling inflation and economic growth, i.e., when inflation rises, the Fed raises the interest rate to reduce borrowing and spending, and vice versa. Since the Fed is holding the interest rate steady for the fifth time in a row, this means that inflation is still high, but there is slow hope for a decrease, and this takes us to a slowdown in the US economy whenever the interest rate is held steady or raised.
Trump, in his second term, is trying to make his economic policy successful; therefore, he is exerting pressure on the Fed to lower the value of interest, which allows the stock market to grow during his period; because he intends to renew his nomination for the presidency, and is trying to use monetary policy in the upcoming elections.
But he is facing a firm stance from Jerome Powell, who believes that the Fed is an independent private institution and will not allow interference in its policy.
From the foregoing, we find that the Fed is following a very cautious policy, and this indicates that the US economy is not doing well. Jerome Powell stated, (Cutting interest rates may lead to inflation rebounding again, which we will not allow).
Here we find that Jerome Powell does not want to repeat the mistake of 1970 when he cut interest rates early, so inflation returned strongly for that reason, and he also says (We are waiting for clear data before any interest rate cut, and we may start with a gradual reduction at the end of 2025 if the slowdown in inflation and growth together is confirmed).
However, this situation is not guaranteed, as there are factors outside the Fed's frameworks that may return the US economy to a state of instability. For example:
* Direct political pressure on the Fed in any form will lead to a return of inflation and capital flight; due to the lack of attractiveness with the high interest rate, and most importantly, the loss of global confidence in the independence of US monetary policy.
* A geopolitical crisis in the straits, which leads to a rise in the price of oil, which in turn leads to a return of inflation again.
* Escalating tension with China and the trade war in general.
And many others, therefore, the US economy is vulnerable to instability in the event of any major global crisis, whether political, military, or financial.
The state of inflation and others is one of the results of the capitalist system; pure utilitarianism and achieving profits for a small group at the expense of the whole world, so the situation we live in today in all its forms and tragedies is the product of the capitalist system that brought ruin and misery to humanity.
The real solution to all of humanity's problems lies in removing this greedy capitalist system and replacing it with a system that preserves man's freedom and humanity, and secures him a decent life, and this will not be with man-made systems, but with a system from God Almighty, for He sent us the method that enables us to achieve renaissance and justice, and it is a method that has been applied for more than 1300 years, but the colonial countries conspired against it and obscured it from existence; because its existence prevented their colonization.
Therefore, we call on every Muslim on this planet to work with those who are working to resume the Islamic way of life and return the divine method to implementation again.
O Muslims in all parts of the world: The solution is in our hands, and what we have to do is to speed up the pace with those who are working to establish God's law, and we will not accept anything else as a ruling for us.
God Almighty said: ﴿And the Jews and the Christians will not be pleased with you until you follow their religion. Say, "Indeed, the guidance of Allah is the [only] guidance." And if you were to follow their desires after what has come to you of knowledge, you would have against Allah no protector or helper.﴾.
Written for the Central Media Office radio of Hizb ut-Tahrir
Dareen Al-Shanti
