Why is the ECB lowering rates but the FED isn't?

[STT]

Trump cant takeover the Federal reserve (or insert a yes man in this manner) without destroying its basis of operation, it'll be an interesting attempt like fireworks when someone drops their lit cigar in the box I guess thats interesting also alarming.
   ECB is seeing a higher euro vs Dollar regardless, that might explain some of the attempt to head off a stronger currency which hurts Germany exports I would guess that alone is enough reason in their eyes.   Tariffs are inflation or higher prices anyway, its fairly certain as a result unless supply springs up suddenly the same demand will result in higher prices.    

I never agreed the FED should have a dual mandate, what if either point is diametrically opposite and in conflict to the other.   FED should have always protected the currency value and they ended up doing the opposite consistently.   The only thing that explains FED action is to avoid a disruptive market, they dont aim for zero inflation they merely aim to calmly lay down this currency to its death at a moderate predictable rate..

[Dump3er]

The ECB has a single mandate: it targets inflation only. So, it must use monetary policy to achieve a 2% inflation growth rate.
The Fed has a dual mandate: inflation and growth. As inflation has not been tamed yet, the Fed cannot lower its rates.

Their mandates can be different, their policies can be different but citizens have same consequence. Inflation, decrease of purchasing power of fiat currencies, recession and they have been more struggling in life since Pandemic Covid-19.

FED and ECB and those nations have one common practice, they would like to soften the severity of global and national recession by using terms like: Soft landing, technical recession.

Citizens even don't mind about those academic distorted terms, because they truly feel recession effects by themselves daily.

I agree they don't mind about a lot of things as long as the consequences are noticed and taken seriously by governments, but single mandate and dual mandate are not academic distorted terms. OP asked a question in the title and got the answer in the precisest version possible and it is the correct answer with significant implications. But the crux of the matter is that these terms lead people to think single mandate is less complex than dual mandate, but it is worth looking into it.

While I understand why you call those terms distorted, it has to be acknowledged that the FED and ECB each have t heir modus operandi.

What's interesting about fillippone's answer is the conciseness, but he knows very well that these two terms single and dual could be unpacked in a 500 pages academic paper with a lot of seemingly distorted terms.

[Abiky]

Seems Powell is having an alpha male competition with Trump. He doesn’t think rates need lowering, Trump does. We will see who blinks first but I read Trump is exploring possibilities to relieve Powell from his duties. Historically the FED always seems to act too late. I think Powell should cut rates, it will make life cheaper for Americans.

As much as Trump wants to fire Powell, I don't think he can do it. At least, not legally. Only Congress can. But with Republicans holding a slim majority on both chambers (House + Senate), anything's possible. It's ironic how the ECB keeps cutting rates, while the FED has taken a more "cautious approach". If it keeps up, the US will be heading towards "stagflation".

All in all, I believe Trump's "Reciprocal Tariffs" could make matters worse in the long run. There's a 90-day pause in effect, but no one knows what will happen afterwards. Either Trump continues what he started, or backs down. If he decides to resume tariffs, the FED should cut rates to help weaken the USD (for cheaper imports). Cutting too much will put inflation out of control, imo. I'm really no expert in Economics, anyways (someone correct me if I'm wrong). The global economy is headed into uncertainty, so we can only hope for the best.

[Swordsoffreedom]

Seems Powell is having an alpha male competition with Trump. He doesn’t think rates need lowering, Trump does. We will see who blinks first but I read Trump is exploring possibilities to relieve Powell from his duties. Historically the FED always seems to act too late. I think Powell should cut rates, it will make life cheaper for Americans.

As much as Trump wants to fire Powell, I don't think he can do it. At least, not legally. Only Congress can. But with Republicans holding a slim majority on both chambers (House + Senate), anything's possible.

That won't happen because if Congress supports and helps Trump fire Powell ,  it will have serious consequences for the US. The world will lose faith in the USD because the Fed is known as an independent agency,  their mission is not only to ensure the US economy but also the world. If Powell is fired, it means the Fed has become politicized and is no longer trustworthy. Trump understands that better than anyone, which is why after much criticism, threats and pressure on the Fed to lower interest rates, he has made it clear that he has no intention of firing Powell.

https://edition.cnn.com/2025/04/22/business/trump-says-he-has-no-intention-of-firing-jerome-powell/index.html

[davis196]

So why is the ECB lowering rates before the FED? It used to be that the FED lead and the rest of the world pretty much followed on it. Now the FED is lagging. Is it because they are scared of a second wave of inflation? Why else wouldn't they lower rates at this point? Assuming the economy is doing well, it wouldn't be a panic cut, it would just be lowering rates because the inflation goal is being achieved, but they aren't in a hurry yet. So what does this signal? It signals that the economy is doing good and lowering rates isn't needed? That's how I read it.

You may have not noticed, but the US dollar dropped in value, in comparison to the Euro. This is bad for the EU export, so the European Central Bank decided to lower the interest rates quickly. Also the news about GDP growth of the Eurozone aren't very positive. Germany might stay in a recession, while France might be facing a GDP growth rate that is close to zero. Trump's tariffs wars might cause inflation(or stagflation) in the USA and deflation in the EU, that's why the Federal Reserve doesn't want to aggressively lower the interest rates.

[Abiky]

That won't happen because if Congress supports and helps Trump fire Powell ,  it will have serious consequences for the US. The world will lose faith in the USD because the Fed is known as an independent agency,  their mission is not only to ensure the US economy but also the world. If Powell is fired, it means the Fed has become politicized and is no longer trustworthy. Trump understands that better than anyone, which is why after much criticism, threats and pressure on the Fed to lower interest rates, he has made it clear that he has no intention of firing Powell.

https://edition.cnn.com/2025/04/22/business/trump-says-he-has-no-intention-of-firing-jerome-powell/index.html

Yes, I know. I hope that doesn't happen. Or we'll be off to extreme economic uncertainty for good. At least, for Americans. The rest of the world will adapt and eventually choose a USD alternative as its reserve currency. With only one year left before Powell's term ends, the odds of Trump firing the chairman are slim. Best bet would be to wait until May 2026, and replace the chairman with one that's loyal to Trump. That could also undermine investors confidence in the US, as the FED will become highly-politicized.

Another thing that could happen is Trump and his administration abolishing the FED for good (End the Fed). It's part of Trump's "Project 2025" agenda (read the document to see for yourself). At least, Europe is doing well. The ECB's rate cuts are a needed boost for the economy. Let's what happens in the long run.

[bitgolden]

So why is the ECB lowering rates before the FED? It used to be that the FED lead and the rest of the world pretty much followed on it. Now the FED is lagging. Is it because they are scared of a second wave of inflation? Why else wouldn't they lower rates at this point? Assuming the economy is doing well, it wouldn't be a panic cut, it would just be lowering rates because the inflation goal is being achieved, but they aren't in a hurry yet. So what does this signal? It signals that the economy is doing good and lowering rates isn't needed? That's how I read it.

You may have not noticed, but the US dollar dropped in value, in comparison to the Euro. This is bad for the EU export, so the European Central Bank decided to lower the interest rates quickly. Also the news about GDP growth of the Eurozone aren't very positive. Germany might stay in a recession, while France might be facing a GDP growth rate that is close to zero. Trump's tariffs wars might cause inflation(or stagflation) in the USA and deflation in the EU, that's why the Federal Reserve doesn't want to aggressively lower the interest rates.

Not entirely sure it is "bad" for EU export, is is not good for the short term that is true, but it is also great for the long term considering you can buy more stuff with less. Imagine a scenario where you used to spend 100 euros to buy a thing, and then USD dropped in value, so people in USA made the thing cheaper, and now you can buy it for 80 euro, isn't that better?

It is way better but also you need to remember that if USD value drops, then you are buying for 80 euros, but someone else spent 100 euros to get it, now you can sell for 90 euro, and he can't, THAT is the bad part but that is temporary and not going to be the case for a very long time. Hopefully, they can make sure that their power is in the long term and can make a lot more money with time.

[takuma sato]

That won't happen because if Congress supports and helps Trump fire Powell ,  it will have serious consequences for the US. The world will lose faith in the USD because the Fed is known as an independent agency,  their mission is not only to ensure the US economy but also the world. If Powell is fired, it means the Fed has become politicized and is no longer trustworthy. Trump understands that better than anyone, which is why after much criticism, threats and pressure on the Fed to lower interest rates, he has made it clear that he has no intention of firing Powell.

https://edition.cnn.com/2025/04/22/business/trump-says-he-has-no-intention-of-firing-jerome-powell/index.html

Yes, I know. I hope that doesn't happen. Or we'll be off to extreme economic uncertainty for good. At least, for Americans. The rest of the world will adapt and eventually choose a USD alternative as its reserve currency. With only one year left before Powell's term ends, the odds of Trump firing the chairman are slim. Best bet would be to wait until May 2026, and replace the chairman with one that's loyal to Trump. That could also undermine investors confidence in the US, as the FED will become highly-politicized.

Another thing that could happen is Trump and his administration abolishing the FED for good (End the Fed). It's part of Trump's "Project 2025" agenda (read the document to see for yourself). At least, Europe is doing well. The ECB's rate cuts are a needed boost for the economy. Let's what happens in the long run.

I don't think it would be that easy. The entire system is built around the USD, it would be a total mess if the rest of the world had to come up with a reserve currency alternative. BTC is clearly not in the mind of the west or at least most countries. Countries like China and Russia may be secretly accumulating BTC for years now, but those are dictatorships so investing on those places is a risk by default since you don't even know if the numbers their companies deliver are real (it's all intervened by the state so they can put anything they want on the balance sheets for all we know). So we are stuck in this weird limbo wondering what will happen if the USD were to reach a point where you cannot trust as reserve currency.  Perhaps the Swiss currency would be a good one since the have good assets on their banks. Im talking about viable fiat alternatives, with BTC you can barely do anything as it stands, so you need a fiat onramp.

[viljy]

~
So why is the ECB lowering rates before the FED? It used to be that the FED lead and the rest of the world pretty much followed on it. Now the FED is lagging. Is it because they are scared of a second wave of inflation? Why else wouldn't they lower rates at this point? Assuming the economy is doing well, it wouldn't be a panic cut, it would just be lowering rates because the inflation goal is being achieved, but they aren't in a hurry yet. So what does this signal? It signals that the economy is doing good and lowering rates isn't needed? That's how I read it.

Rates are usually lower if there is a recession in the economy. The Fed is not cutting rates, obviously, because the U.S. economy is in better shape than the Eurozone economy. This is understandable, Europe has lost cheap resources forever and is now buying American liquefied natural gas, green energy is unable to fully meet the needs of industry (as evidenced by the recent power outage in Spain). A large sales market has also been lost, which is already 100% occupied by China (for example, the Russian automotive market). In this situation, the U.S. economy is in a much better position than the European economy. I wouldn't be surprised if interest rates are ever lowered to negative values. By the way, this happened several years ago.

[Swordsoffreedom]

Best bet would be to wait until May 2026, and replace the chairman with one that's loyal to Trump. That could also undermine investors confidence in the US, as the FED will become highly-politicized.

That is a good opportunity for Trump to replace Powell with someone closer to him , but it's not as easy as you might think. The president will have the power to nominate a new Fed chairman , but the final decision will be made by the Senate. If the Senate does not approve, Trump will have to nominate a new candidate .  Although Republicans control the Senate, not all Republicans support all of Trump's ideas, so there is no guarantee that things will go his way .

Another thing that could happen is Trump and his administration abolishing the FED for good (End the Fed). It's part of Trump's "Project 2025" agenda (read the document to see for yourself).

Power in the US is distributed among three separate branches of government, rather than concentrated in a single person/organization. So this cannot happen, Trump has no authority to interfere with the Fed's internal decisions, let alone abolish them.

[Abiky]

That is a good opportunity for Trump to replace Powell with someone closer to him , but it's not as easy as you might think. The president will have the power to nominate a new Fed chairman , but the final decision will be made by the Senate. If the Senate does not approve, Trump will have to nominate a new candidate .  Although Republicans control the Senate, not all Republicans support all of Trump's ideas, so there is no guarantee that things will go his way .

....

Power in the US is distributed among three separate branches of government, rather than concentrated in a single person/organization. So this cannot happen, Trump has no authority to interfere with the Fed's internal decisions, let alone abolish them.

Exactly. To top it all off, Republicans hold a slim majority in the Senate, so they will have to negotiate with Democrats to elect the a new chairman for the FED. A Trump loyalist won't reach the favor of Democrats and "classic" (anti-Trump) Republicans. However, we've seen Trump testing his limits when defying court orders from judges (as per claims from the media). So anything's possible.

I'm not worried who gets selected as the next chairman of the FED, as long as that person puts the economy first above all else. Let's see what happens in the long run.

[sana54210]

Best bet would be to wait until May 2026, and replace the chairman with one that's loyal to Trump. That could also undermine investors confidence in the US, as the FED will become highly-politicized.

That is a good opportunity for Trump to replace Powell with someone closer to him , but it's not as easy as you might think. The president will have the power to nominate a new Fed chairman , but the final decision will be made by the Senate. If the Senate does not approve, Trump will have to nominate a new candidate .  Although Republicans control the Senate, not all Republicans support all of Trump's ideas, so there is no guarantee that things will go his way .

FED is doing an alright job, why would anyone trust a Trump loyalist? Not that Powell is great, I would not be against changing Powell, but I would say getting someone just because they are close to Trump isn't the way you should pick people.

There are noble winners in the USA right now, how come nobody talks about them, these are guys who worked on economy so much that they won noble in economy, so they should be able to get it, how can they not get it. Instead of picking the best political person, get the best educated and qualified person so that the nation could do a lot better. Neither Powell nor "Trumps guy" could do the same, find a great qualified person and the economy of the nation will end up getting better because they would know what is good, and not what gets votes.

[takuma sato]

Best bet would be to wait until May 2026, and replace the chairman with one that's loyal to Trump. That could also undermine investors confidence in the US, as the FED will become highly-politicized.

That is a good opportunity for Trump to replace Powell with someone closer to him , but it's not as easy as you might think. The president will have the power to nominate a new Fed chairman , but the final decision will be made by the Senate. If the Senate does not approve, Trump will have to nominate a new candidate .  Although Republicans control the Senate, not all Republicans support all of Trump's ideas, so there is no guarantee that things will go his way .

FED is doing an alright job, why would anyone trust a Trump loyalist? Not that Powell is great, I would not be against changing Powell, but I would say getting someone just because they are close to Trump isn't the way you should pick people.

There are noble winners in the USA right now, how come nobody talks about them, these are guys who worked on economy so much that they won noble in economy, so they should be able to get it, how can they not get it. Instead of picking the best political person, get the best educated and qualified person so that the nation could do a lot better. Neither Powell nor "Trumps guy" could do the same, find a great qualified person and the economy of the nation will end up getting better because they would know what is good, and not what gets votes.

Trump has capitulated and said that he will not be firing Powell and that he will remain in charge for the duration of the term, as if Trump ever had the ability to fire Powell. Trump is just a clown and thinks he can rule the US as if he was Putin. As far as Powell, he has been doing a good job in achieving a soft landing until Trump started his tariff plan, and so now we have all this volatility that wasn't part of the scenario that he was contemplating so now he has to deal with that and he isn't convinced that lowering rates is the way to go since we don't know what will happen with inflation once tariffs really start kicking in. Rumors say that in May we will see missing products on shelves already so that may be inflationary, and if Powell cuts then we will have even more inflation. Now Powell is trapped trying to guess what he will do.

[kryptqnick]

Well, when the economy is overheating and prices are rising, the central bank raises the interest rate. The idea is that loans become more expensive, people and businesses spend less, and inflation goes down. The ECB is for Eurozone, and this move by them means they believe that EUR is stable enough for that and the economy could use more activity.
The Fed is in the US, and with Trump's sudden and rapid policy changes, my guess is that they're staying on a safe side for now, not to risk higher inflation.

[Lucius]

The Fed seems to be a personal tug of war between the Fed chairman and Trump, but two rate cuts are expected this year, although not at the pace Trump would like. The ECB doesn't have that problem, it will print as much money as it can to make the arms dealers rich while the people poorer and with worse services.

Someone always gets rich, and when it comes to war, it is always those who produce and sell weapons - when you look at the amount of weapons and equipment delivered from the US (and its partners) to Ukraine in the past 3 years, it is not difficult to conclude that the military business is booming in the US.

The EU simply has no other choice but to arm itself, which is actually one of the few positive effects of the new US administration, which rightly no longer wants to protect the EU at its expense. The war in Eastern Europe and the EU's complete disengagement from Russia have completely turned the way we think about security upside down.

If someone had told me 5 years ago that the EU countries would begin to restore mandatory military service, buy the most modern military equipment and start taking care of themselves, I would have said that they were talking nonsense.

~snip~
In short: ECB is reacting to external pressure. The Fed is bracing for internal combustion.
Two empires, two timelines, same storm, different vessels.

Perfectly defined - now it's just a question of whose storm will be stronger (last longer) and who will cope better in the rough seas. I find it hard to believe that the US wants to shoot itself in the knee, but when I see the relationship they have with their major partners, it seems to me that they will simply force many countries to look for solutions to their problems elsewhere.

I recently read an article that the number of visits from the EU to the US has decreased considerably - is the reason because people are starting to save money or is it simply a protest against the policies that the US is currently implementing?

[Dogedegen]

Manipulation and political plays. The chairman is enjoying his wealthy income while doing nothing except participating in useless meetings where they circlejerk each other and congratulation themselves for doing absolutely nothing. As if there is going to be a economical catastrophe if the rates are lowered a bit early. The negative impact would be minimal, but they want you to understand that they are doing a lot of work for their extremely well paid jobs.

Trump has capitulated and said that he will not be firing Powell and that he will remain in charge for the duration of the term, as if Trump ever had the ability to fire Powell. Trump is just a clown and thinks he can rule the US as if he was Putin. As far as Powell, he has been doing a good job in achieving a soft landing until Trump started his tariff plan, and so now we have all this volatility that wasn't part of the scenario that he was contemplating so now he has to deal with that and he isn't convinced that lowering rates is the way to go since we don't know what will happen with inflation once tariffs really start kicking in.

It is a risky move, but Powell deserves to be fired. You are wrong, he has been doing a terrible job regardless of Trump. You can analyze his performance irrespective of trump's existence, you know?

Rumors say that in May we will see missing products on shelves already so that may be inflationary, and if Powell cuts then we will have even more inflation. Now Powell is trapped trying to guess what he will do.

Good old democratic propaganda disguised a legitimate rumors?

[Abiky]

Trump has capitulated and said that he will not be firing Powell and that he will remain in charge for the duration of the term, as if Trump ever had the ability to fire Powell. Trump is just a clown and thinks he can rule the US as if he was Putin. As far as Powell, he has been doing a good job in achieving a soft landing until Trump started his tariff plan, and so now we have all this volatility that wasn't part of the scenario that he was contemplating so now he has to deal with that and he isn't convinced that lowering rates is the way to go since we don't know what will happen with inflation once tariffs really start kicking in. Rumors say that in May we will see missing products on shelves already so that may be inflationary, and if Powell cuts then we will have even more inflation. Now Powell is trapped trying to guess what he will do.

Powell won't do it, but Trump's new FED chairman will. Just wait until May 2026 to see this happen. Rate cuts are coming whenever we like them or not. That, combined with tariffs, will raise inflation all the way to the moon.

I'm beginning to think the US is on the brink of "hyperinflation". Meanwhile, China and the EU continue to grow without disruptions. They will strengthen economic ties, effectively leading us to a "New World Order". The ECB is cutting rates, while China is moving to other markets to keep its business afloat. Where does that leave the US? Alone, isolated from the rest of the world (America First). At least, that's how I see it. But I could be wrong. Maybe there's "light at the end of the tunnel"? I hope so. These are uncertain times, so anything's possible.

[jaberwock]

Powell won't do it, but Trump's new FED chairman will. Just wait until May 2026 to see this happen. Rate cuts are coming whenever we like them or not. That, combined with tariffs, will raise inflation all the way to the moon.

I'm beginning to think the US is on the brink of "hyperinflation". Meanwhile, China and the EU continue to grow without disruptions. They will strengthen economic ties, effectively leading us to a "New World Order". The ECB is cutting rates, while China is moving to other markets to keep its business afloat. Where does that leave the US? Alone, isolated from the rest of the world (America First). At least, that's how I see it. But I could be wrong. Maybe there's "light at the end of the tunnel"? I hope so. These are uncertain times, so anything's possible.

"Hyper" part seems a bit like we are making this bigger than it should be. At the very very worst case, I would assume 20% would be the key here, nothing more. I know that we are going to make some bigger changes eventually, like the whole nation will have to increase the rates again and live on a very "help me" state from the government, like ask for handouts again, printed money, non-recoverable damages etc etc. But it still wouldn't be 100% or more.

And to call it hyper inflation, we need to have something large like that, otherwise it makes no sense to call it hyper. If inflation is even 20% that is terrible and that is of course bad for USA because they are not used to those and when that does happen, their entire infrastructure is not ready for it and takes time to recover. But that still isn't hyperinflation.

[STT]

It would be hyper if the whole system collapsed but we presume they can arrest the fall of dollar etc.   Hyper would result if say California left USA or other large changes that put the debt into doubt and so currency problems resulted.    
  I believe vast inflation problems are more probable then we recognize because of how debt can slip into doubt and also raise costs with higher rates at the same time.   Federal reserve deliberately increased risk by decreasing the average term in the 1990's and ever since there has been a bad bias, hence a market over reaction can occur.

Rate cuts are coming whenever we like them or not. That, combined with tariffs, will raise inflation all the way to the moon.

If tariffs cause higher prices which they do almost by default and Fed policy reflects consumer price changes and addresses this as higher inflation vs rates then rate cuts become more improbable.   Trump thinks its correct to cut rates not recognizing the cost of his own actions may have made it much harder for the Federal reserve to do this.

[takuma sato]

Manipulation and political plays. The chairman is enjoying his wealthy income while doing nothing except participating in useless meetings where they circlejerk each other and congratulation themselves for doing absolutely nothing. As if there is going to be a economical catastrophe if the rates are lowered a bit early. The negative impact would be minimal, but they want you to understand that they are doing a lot of work for their extremely well paid jobs.

Trump has capitulated and said that he will not be firing Powell and that he will remain in charge for the duration of the term, as if Trump ever had the ability to fire Powell. Trump is just a clown and thinks he can rule the US as if he was Putin. As far as Powell, he has been doing a good job in achieving a soft landing until Trump started his tariff plan, and so now we have all this volatility that wasn't part of the scenario that he was contemplating so now he has to deal with that and he isn't convinced that lowering rates is the way to go since we don't know what will happen with inflation once tariffs really start kicking in.

It is a risky move, but Powell deserves to be fired. You are wrong, he has been doing a terrible job regardless of Trump. You can analyze his performance irrespective of trump's existence, you know?

Rumors say that in May we will see missing products on shelves already so that may be inflationary, and if Powell cuts then we will have even more inflation. Now Powell is trapped trying to guess what he will do.

Good old democratic propaganda disguised a legitimate rumors?

Easier said than done. Everyone can do an amazing job running a central bank, the most important central bank on earth to boot, from the comfort of your screen typing some comments, but let's be realistic, if you had to actually do it, it would be different.
All im saying is, tariffs are inflationary, or there is at least a rationale behind the prediction of inflation due tariffs, and so that is what Powell has done, frontrun possible inflation by keeping the rates as they are. And what does Trump do now, they say they are lowering China's tariffs. So Trump has been flip flopping for months with this, it's only fair that you may be cautious and just keep rates as they are until Trump lays out a more predictable plan, then they can lower rates. If they lower rates and we see another peak on inflation, that may be a bigger problem than having rates higher for longer for a while.