Federal Reserve Maintains Interest Rates Amid Trump's Pressure for Cuts, Citing Economic Uncertainty

The Federal Reserve maintained its benchmark interest rate at 4.25% to 4.5% for the third consecutive meeting, despite President Donald Trump's calls for rate cuts. Fed Chair Jerome Powell emphasized the Fed's commitment to data-driven decisions amid economic uncertainty from new tariffs. Powell reiterated the Fed's independence and indicated no immediate need to adjust rates. Trump's pressure for lower rates continues, but Powell remains focused on economic data, noting that current conditions do not warrant a policy change.

Fed Maintains Steady Course Amid Tariff Turbulence

Following a two-day policy meeting, the Federal Open Market Committee (FOMC) unanimously voted to maintain the federal funds rate at its current range, a level set in late 2024 after a series of rate cuts earlier that year. The decision came as no surprise to financial markets, which had largely priced in a hold, but it stood in stark contrast to President Trump’s repeated demands for immediate rate reductions.

The Fed’s statement cited “increased uncertainty about the economic outlook,” pointing to the administration’s recent imposition of 10% tariffs on nearly all U.S. imports and a 145% levy on Chinese goods. These measures have raised concerns about inflationary pressures and potential drag on economic growth.

“The level of the tariff increases announced so far is significantly larger than anticipated,” Powell said in remarks last month at the Economic Club of Chicago. “The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”

Powell: “We Can Be Patient”

At a press conference following the rate decision, Powell struck a cautious tone, emphasizing that the Fed is in a “good place to wait and see” before making any further moves on interest rates.

“We don’t think we need to be in a hurry,” Powell told reporters. “We think we can be patient.”

He acknowledged that the scope and scale of the new tariffs have heightened the risk of both rising inflation and unemployment, but noted that current economic data does not yet warrant a policy shift. Inflation, as measured by the Fed’s preferred gauge, rose 2.3% in March from a year earlier—slightly above the central bank’s 2% target but not alarmingly so. Meanwhile, the labor market remains resilient, with only a modest dip in hiring reported in April.

“Economic activity continues to expand at a solid pace, and the labor market remains strong,” Powell said. “We are watching the data closely, but we do not see a need to act preemptively.”

Trump’s Pressure Campaign

President Trump has intensified his public campaign for lower interest rates in recent weeks, arguing that falling energy prices, stable inflation, and strong employment figures justify a more accommodative monetary stance.

“Energy down, mortgage rates down, employment strong, and much more good news,” Trump wrote in a social media post last week. “NO INFLATION, THE FED SHOULD LOWER ITS RATE!!!”

The president has also taken aim at Powell personally, calling him “Mr. Too Late,” a “total stiff,” and a “major loser.” Trump reportedly considered firing Powell earlier this year, though he has since backed off, citing the Fed chair’s term expiration in May 2026.

“Why would I do that?” Trump said in a recent NBC News interview. “I get to change him very quickly anyway.”

Despite the rhetoric, Powell has remained composed and deflected questions about the president’s criticism. “I don’t have anything more for you on that,” he said when asked about Trump’s threats. “Our job is to do what’s best for the American people, and we’re going to keep doing that.”

Independence Under Fire

The Fed’s decision underscores its commitment to maintaining independence from political influence, a principle Powell reaffirmed during his press conference.

“Our decisions are based solely on the economic data, outlook, and risks,” he said. “Political considerations do not play a role in our deliberations.”

Powell also dismissed the idea of seeking a meeting with the president, noting that historically, it has been the White House—not the Fed—that initiates such discussions. “I’ve never asked to meet with any president, and I don’t intend to,” he said.

Market Reaction and Outlook

Markets initially responded positively to the Fed’s steady hand, with the Dow Jones Industrial Average rising more than 200 points ahead of the announcement. However, gains were pared back after the Fed’s statement highlighted rising risks to the economic outlook, including the potential for stagflation—a scenario in which inflation rises even as growth slows.

Looking ahead, traders are still betting on rate cuts later this year. According to CME FedWatch data, markets are pricing in a near-certain probability of a 25-basis-point cut by July, with additional reductions expected in September and October. Goldman Sachs economists echoed that view, suggesting that even elevated inflation may not deter the Fed from easing if the “tariff shock” begins to weigh more heavily on the economy.

For now, however, Powell and his colleagues appear content to hold their ground.

“We’re not in a position to act preemptively,” Powell said. “We need to see more data.”

References

• The Fed holds interest rates steady as Trump's tariffs spark uncertainty
• Fed holds rates steady, defying Trump's call for cuts
• Fed Doesn’t Cut Interest Rates Again—Despite Trump’s Demands—As It Warns Of Higher Unemployment Risk
• 米FRB 利下げを見送り 政策金利の据え置き決定 3会合連続 | NHK