Geopolitical

The United States Federal Reserve will hold interest rates steady as the labour market cools and prices on goods and services surge following the US and Israel’s joint strikes on Iran.

The central bank will maintain its benchmark rate at 3.5–3.75 percent, consistent with the Fed’s decision last month, when it also held rates steady.

“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The implications of developments in the Middle East for the US economy are uncertain,” the central bank said in a statement announcing its policy decision and referring to its Federal Open Market Committee.

“The Committee is attentive to the risks to both sides of its dual mandate.”

Holding rates steady was in line with estimates. CME FedWatch, a tool that tracks monetary policy decisions, forecast that there was a 99 percent chance that rates would hold steady.

The stall comes after three rate cuts in 2025.

Global gripes

Consumers are also facing the repercussions of US President Donald Trump’s trade and military policies in their daily expenses.

“Despite meaningful progress on inflation in 2024, Trump’s tariffs have stalled progress and kept inflation persistently above the Fed’s target. Wholesale prices are running hot as service prices surge, and now, Trump’s war in Iran is rocking commodity markets around the globe,” Elizabeth Pancotti, managing director of policy and advocacy at Groundwork Collaborative, an economic think tank, said in comments provided to Al Jazeera.

Last month, the US Supreme Court ruled against the president for his use of the International Emergency Economic Powers Act (IEEPA). The high court said the president exceeded his authority and that the tariffs imposed under that order must be refunded. However, the president then imposed new tariffs not covered by IEEPA.

The White House announced a 15 percent tariff through Section 122, which allows the president to impose tariffs for 150 days. Those changes were reflected in the producer price index report released by the US Department of Labor’s Bureau of Labor Statistics on Wednesday.

Wholesale prices rose by 0.7 percent for the month, marking the biggest one-month surge in a year. Goods prices rose 1.1 percent overall after tumbling for two months. Energy prices rose by 2.3 percent, with the cost of gas or petrol rising by 1.8 percent. Those costs are expected to get higher as tensions rise in the Strait of Hormuz following joint US-Israel strikes on Iran in late February and the subsequent retaliation.

“In the near term, higher energy prices will push up overall inflation; however, it is too soon to know the scope and duration of the potential effects on the economy,” Fed Chair Jerome Powell told reporters.

In the last month, petrol prices have jumped for US consumers. The average price for a gallon of regular gasoline is $3.84, up from $2.92 this time last month.

“The Fed’s inflation worries extend beyond weathering a fleeting wave of one-off price hikes associated with tariffs and, more recently, an energy price spike,” Stephen Stanley, chief US economist at Santander US Capital Markets, told the Reuters news agency.

Labour market stalls

Holding rates steady also comes as the job market stagnates. The latest jobs report, which was released earlier this month, showed that the US economy lost 92,000 jobs, with unemployment rising to 4.4 percent.

Meanwhile, the Job Openings and Labor Turnover Survey, or JOLTS report, which came out last week, showed 6.9 million open jobs in the US, unchanged from the month prior. That shows that employer hiring has stalled and that those who have jobs are seldom leaving for new ones.

“This might be one of the toughest moments in recent memory for the Federal Reserve’s Open Market Committee,” Michael Linden, Senior Policy Fellow at the Washington Center for Equitable Growth, said in remarks provided to Al Jazeera. “Recent data has revealed that economic growth in the back half of last year was extremely weak, the labour market seems to be on the precipice of disaster, and prices keep rising faster than anyone feels comfortable with.”

Political undercurrents

Wednesday’s decision is the second-to-last one of current Fed Chair Powell, whose term is up in May. Powell, who was first appointed by Trump during his first administration, has been a target of Trump’s scorn and criticisms for not cutting interest rates fast enough.

“When is ‘Too Late’ Powell lowering INTEREST RATES?” Trump posted on his social media platform Truth Social on Wednesday morning ahead of the decision.

Previously, Trump said he would not nominate someone to lead the central bank unless the nominee agreed with his position.

“Anybody that disagrees with me will never be the Fed Chairman!” Trump said in a post on Truth Social in December.

“We at the Fed will continue to do our jobs with objectivity, integrity and deep commitment to serve the American people,” Powell told reporters.

Trump’s nominee to succeed Powell, Kevin Warsh, has his nomination in flux as Republican Senator Thom Tillis said he would not vote to advance any of Trump’s nominees to the central bank until a criminal probe into the current chairman, Powell, is closed.

Tillis sits on the Senate Banking Committee, which vets nominees for the central bank, including Warsh. He said he will not approve Trump’s Fed nominees until the probe of Powell is closed. The criminal probe of Powell centres on Fed building renovations after a judge quashed grand jury subpoenas and called the investigation a pretext to pressure the central bank to lower interest rates.

If Warsh has not been confirmed by the Senate in time for the Fed’s June 16–17 meeting, Powell would continue to lead the rate-setting Federal Open Market Committee.

“If my successor is not confirmed by the end of my term as chair, I would serve as chair pro tem until he is confirmed. That is what the law calls for,” Powell said.

“On the question of whether I will leave while the investigation is ongoing, I have no intention of leaving the board until the investigation is well and truly over with transparency and finality.”

What is the bandwagon technique?

Bandwagon is a propaganda technique that utilizes the instinct of human participation in a systematic manner. It has a simple but deadly basic idea, creating the impression that “everyone is on this side” and that others will join in not because they think critically, but because they are afraid of being left behind, afraid of being seen as wrong, or afraid of being ostracized. In international relations, this technique not only affects public opinion but is also used to pressure countries to follow certain geopolitical positions, build alliances that seem “inevitable,” and delegitimize anyone who chooses not to participate. Motin (2024), in his study on bandwagoning in international relations, explains the behavior of the bandwagon of small and medium countries that are greatly influenced by the perception of global power distribution. When a great power manages to convince the world that it is “winning” or that its position is already the consensus of the majority, other weaker nations tend to conform to that power to avoid the risk of being on the losing side. This is the essence of the bandwagon in propaganda, manipulating perceptions of who is superior. (Dylan Motin, 2024)

Theoretical Roots: Balancing vs Bandwagon

In the theory of international relations, bandwagoning always coexists with the concept of its opponent, namely balancing. According to Cladi & Locatelli (2015), he explained about the alliance theory that states basically have two choices when facing dominating powers, namely by balancing or following (bandwagoning). These decisions are not always taken solely based on strategic calculations but are greatly influenced by the way information regarding the balance of power is conveyed and perceived. This is where the propaganda bandwagon comes into play: through the manipulation of views about who is stronger and more numerous, countries can be invited to ‘join in’ even though the current has actually been set up. A study on alliance theory, published by OPS Alaska Academic in 2003, confirms that in an anarchist international system, small countries are particularly vulnerable to pressure to join because they do not have the resources to independently verify claims about international consensus. They tend to respond to the signals that are most powerful and appear most often in their information environment. These signals can be easily affected by large forces through various operations. (Cladi & Locatelli, 2015) (Thomas Gangale, 2003)

How Does Bandwagon Work in the Field?

To understand this technique concretely, we can look at the example of Sri Lanka discussed in the International Journal of Humanities and Social Science (2015). The study notes how Sri Lanka, during various periods of internal conflict and international pressure, constantly had to navigate between two great powers, each trying to create a narrative that ‘joins us because all that is rational is here.’ ‘Sri Lanka is a prime example of a small country that is the target of bandwagon propaganda from multiple parties at once, where each major power seeks to create the illusion of consensus that they represent the majority of the world. Nanyang Technological University’s RSIS said that the simple division between balancing and bandwagoning is no longer sufficient to explain the behavior of countries in the now much more complex international system. Countries not only choose to fight or follow but also hedge, that is, pretend to follow while secretly maintaining a strategic distance. In addition, bandwagon propaganda techniques are increasingly being used to complicate these hedging options by creating increasingly strong social and reputational pressure on countries that are reluctant to publicly declare their choice (Gunasekara, 2015) (Ian, 2003) (Ian, 2003).

Bandwagon in the Global Disinformation Machine

One of the aspects that makes the bandwagon even more dangerous today is the way it works, which is integrated with large-scale disinformation operations. In the Journal of Advanced Military Studies, it is explained that contemporary political warfare involves not only conventional military power but also efforts to create an information environment that makes resistance feel illogical and futile. The bandwagon serves as a key psychological mechanism in building such an environment: when all sources of information seem to convey the same message, even the most critical individuals begin to doubt their own judgment. The Oxford Internet Institute notes in their in-depth report that in 2020, at least 81 countries have used organized social media strategies to reinforce the impression that their governments have broad support from the public, both domestically and internationally. Thousands of bot accounts and cooperating accounts are launched to fill public discussion spaces with consistent messages, creating a very convincing illusion of consensus. When people turn to social media and see that ‘everyone’ seems to support a certain narrative, the bandwagon effect automatically takes effect, even without realizing it. (Forest, 2021) (Forest, 2021) (Samantha Bradshaw et al., 2020), (Samantha Bradshaw et al., 2020)

Closing: Thinking Independently as the Last Fortress

The effective bandwagon technique is not because the people or the target country are less intelligent. Its effectiveness lies in the use of something fundamental, namely, the desire to side with the right side and the fear of the consequences of loneliness. In the context of international relations, the consequences can be diplomatic isolation, economic sanctions, or loss of access to security alliances. This pressure prompted many countries to go with the flow even though the currents were made up of the Oxford Internet Institute emphasizing that to counter the modern bandwagon propaganda operation, goodwill alone is not enough. It requires a real combination that includes the state’s ability to detect information manipulation early on and the public’s critical awareness of the narrative it constructs, as well as a serious investment in an analytical capacity that is completely independent of the influence of great powers. The state can verify claims about its own ‘international consensus’ and not only rely on information crowded in the media or digital platforms. A state that has true sovereignty in the era of this global information war. Ultimately, the most effective weapon against bandwagon propaganda is the ability to question things in a simple but critical way: is it true that everyone is involved, or is it just an illusion deliberately created to force your involvement? (Samantha Bradshaw et al., 2020)