Liam Dann: NZ Herald business editor at large on the US Federal Reserve leaving rates on hold

The US Federal Reserve has left its benchmark interest rate unchanged, due to stubbornly high inflation.

US President Donald Trump has voiced his disapproval with this move and accused the central bank of mishandling the economy.

NZ Herald business editor at large Liam Dann unpacks this result - and explains why it's unsurprising rates were left on hold.

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Episode Transcript

Speaker 1 (00:00):
The US FED has left interest rate steady. This morning,
here's Jerome Powell, Chair, and just very much.

Speaker 2 (00:06):
In the mode of waiting to see what policies are inactive,
and we don't know what will happen with tariffs, with immigration,
with fiscal policy, and with regulatory policy. We're only just
beginning to see. Actually are not really beginning to see much.
And I think we need to We need to let
those policies be articulated before we can even begin to

(00:29):
make a plausible assessment of what their implications for the
economy will be.

Speaker 1 (00:32):
So, in other words, with Donald Trump, what you don't know,
you don't know, and there's a lot we don't know
at this point. Liam Dan as The Herald's Business editor
at large, and he will me tonight. Hey, Liam, Goday, Ryan,
I mean the markets we're expecting a hold, right, Yeah.

Speaker 3 (00:47):
No surprise. Really, you know, Jerome Powell knows about as
much as we do. As far as you know what
Donald Trump is going to actually enact. We've already you know,
we heard a lot on the campaign trail. We heard about,
you know, fifty sixty percent tariffs on China. Since inauguration,
we've heard he was going to have a ten percent

(01:09):
tariff on China by February one, tariffs for Canada and Mexico.
And look, it looks you know that that tariff policy
does have, you know, potentially an impact on inflation, but
you know, you just can't say it. He's got a
he's got a review of US trade policy that comes

(01:29):
back in April. That sounds, you know, like a sort
of sensible plan. But in the meantime he's kind of
using using tariffs as a weird diplomatic tool, as we
saw with Columbia at the weekend, and.

Speaker 1 (01:41):
Quite an effective one as well.

Speaker 3 (01:44):
Yeah, well it seemed to work. I mean, that's that's
that's the thing. But you know, Columbia is not a
not a big powerful nation in the grand scheme of things,
and you know, how's that going to go with Europe
or China, who would have to wait and see.

Speaker 1 (01:56):
Exactly, or even India. I was reading last time Trumpason
and he hit them with they hit America back with tariffs,
and so this is potentially what you start as a
tariff war, and we all lose when that situation eventuates.

Speaker 3 (02:09):
Yeah, well, I guess what we're talking about here is
what happens to inflation and interest rates. And there's three
there's three things that the economists and that fact Pale
mentioned and there you know, Trump wants to pump the
economy so as well as the tariffs, which he thinks
are good for US business. Obviously, he's talking about tax
cuts to get business humming, and he's talking about, you know,

(02:33):
some sort of moving regulation to get business humming. And
the thing is that that that potentially can get business
humming much faster than the actual you know, capacity of
the economy can cope with. And that's where you get
that sort of stimulus effect that we had through COVID,
and inflation comes back. Plus, the tariffs are a cost,
and they're talking about of course deporting all their cheap workers,

(02:54):
so that you know, there's people looking at him what
that might do to the cost of labor. And so yeah,
if unless Donald Trump's right and there's some magic economic
formulas that people don't understand, because he has said that
he knows more about this than the guys at the FED,
then there is a high probability that you know, US

(03:15):
station inflation stays higher and that means their rates stay higher,
and that pushes up, that pushes up the cost of
international borrowing, which unfortunately our banks still rely on because
we don't have deep enough markets here. So regardless of
what our reserve bank does, that could mean that the
mortgage rates just don't come down as much as we'd hope.

Speaker 1 (03:37):
But does that does does it mean that the exchange
rate will stay favorable to our exporters?

Speaker 3 (03:44):
Yeah, well, that's that's a spinoff, a good spin off,
and a nice thing about having a floating dollar. So
it's some bad news if you're looking to go on
a whole day in the in the US. And it
also isn't great for our inflation either, because it's lifting
the important cost of imported goods like most obviously oil
and petrol. But yeah, it is giving extra fair winds

(04:05):
to the dairy and meat exporters because they you know,
they're bringing the US dollars back into New Zealand dollars
and getting more dollars in their pocket locally. So yeah,
that's that's a sort of a stimulus, I guess for
our economy in some respects, but it's kind of balanced
out by the fact that if interest rates don't come

(04:26):
down as much, so it's all sort of swings and roundabouts,
and yeah, I guess we would probably be hoping overall
that the US could see some interest rates come down.
The FEDS well, you know, the experts now think maybe
just one or two cuts this year, but again they're
kind of guessing. And it also has an effect on

(04:47):
on the Wall Street. And so if interest rates stay high,
Wall Street is not likely to be as as good
or as strong, and that's also an issue for our
key we savers, of course, So.

Speaker 1 (04:57):
Take take forecasts with a pinch of salt at the moment.
William absolutely, thank you so much for that, Liam Dan,
New Zealand Herald Business Editor at Large. For more from
Heather Duplessy Allen Drive, listen live to news talks.

Speaker 3 (05:11):
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