Following the conclusion of their most recent two-day policy meeting, the first to be held during the second Trump administration, Federal Reserve members held interest rates constant on Wednesday. Despite pressure from President Donald Trump on officials to decrease rates, that choice was made.
At 2:30 p.m. ET, Fed Chairman Jerome Powell will discuss the central bank’s current outlook on interest rates and the status of the economy.
Trump stated last week in a comprehensive videoconference speech to the World Economic Forum in Davos, Switzerland, that he would seek an immediate cut in interest rates and that they should be falling globally. Interest rates ought to track us everywhere.
The remarks continued Trump’s practice of making his monetary policy opinions public, which previous American presidents have avoided for a long time in order to keep the Fed politically independent.
In follow-up remarks following his Davos speech, he stated, “I know interest rates much better than they do.” Additionally, he reiterated his criticism of Powell, whom he nominated in 2017 and has vowed not to fire before Powell’s term expires in May 2026.
Since Trump’s departure in January 2021, the U.S. economy has undergone significant change, with the nation still engulfed in the Covid-19 outbreak and acrimonious disagreements regarding lockdown protocols to battle it.
Although it has been above the Fed’s 2% target rate for months, inflation has mostly subsided to 2.9% as of December following a pandemic-era price spike that severely damaged the finances of many people. After companies added more than a quarter-million jobs, unemployment decreased slightly to 4.1% in December from 4.2% the previous month, allaying concerns about a labor market that has held up well despite cooling.
Meanwhile, despite households’ growing emphasis on value, consumer expenditure has remained stable. Federal researchers said in December that the GDP, which is mostly driven by the consumption of goods and services, had increased by at least 3% for two consecutive quarters.
These and other indicators, according to analysts, show that the economy is still doing well in spite of the challenging final mile in the inflation struggle, which would lessen the need for a new Fed boost just yet. After reducing rates for three straight meetings, the central bank has scheduled two rate cuts this year, bringing its benchmark rate down from a 20-year high range of 5.25%–5.5% to the current level of 4.25%–4.5%.
However, experts say it has grown increasingly difficult to maintain borrowing costs high enough to restrain price increases without sending the economy into a recession.That is mostly because of Trump’s economic agenda, especially his tariffs, of which his first policy action is anticipated on Saturday.
Elizabeth Renter, senior economist at NerdWallet, stated in a statement on Tuesday ahead of the most recent interest rate announcement that Fed policymakers are currently in a very difficult position. Now that the new administration is in office and starting to function, discussions about policies that involve a higher risk of inflation are given more weight.
Joe Brusuelas, chief economist at the financial firm RSM, stated in a report Tuesday that it is certain that the Trump administration’s immigration and trade policies will influence the central bank’s actions this year. The Fed’s long-held 2% inflation objective would be at jeopardy if these actions resulted in greater inflation or, more importantly, increased inflation expectations.