Fed Maintains Interest Rates in Face of Trump's Pressure: US Central Bank Holds Rate at 4.25-4.5%
Central Bank of the United States disregards Trump's call for interest rate reduction. - In stark opposition to Trump's requests, the US Federal Reserve maintains its stance against reducing interest rates.
In a surprise move, the US Federal Reserve (Fed) has kept the key interest rate unchanged at a relatively high 4.25-4.5%. This decision bucked the expectations of many, including President Donald Trump who had been vocally urging for a reduction in borrowing costs.
After undertaking a series of rate hikes in 2024 to combat post-pandemic inflation, there were no further adjustments in 2025. This inaction comes despite predictions from analysts that the central bank would maintain the status quo.
Why Does Interest Rate Matter?
The interest rate is crucial for the Fed to achieve its two primary objectives: restraining inflation and maintaining a healthy unemployment rate. It determines the rate at which commercial banks can borrow from the central bank, which then impacts costs for consumers and businesses. Lower interest rates, for example, would make loans cheaper in the long run, potentially stimulating the economy by providing consumers more spending money and reducing costs for credit-financed investments.
Why Does Trump Want Lower Rates?
The Fed's independence from politics typically means it's not directly influenced by political comments or demands. However, politicians, notably the president himself, can't help but make their opinions known. Trump has been advocating for lower rates for months, claiming they would further stimulate the economy.
To amplify his demand, Trump has publicly criticized Fed Chair Jerome Powell, labeling him a "fool" and "stupid." On the eve of the Fed announcement, he called Powell out again, saying he was "not doing his job." Trump has even suggested the Fed follow in the footsteps of European Central Bank (ECB) with interest rate cuts, which the ECB recently lowered to 2.0%.
Why Won't the Fed Lower Rates?
There are several reasons why the Fed hasn't capitulated to Trump's demands:
- Strong Economic Conditions: The economy remains healthy, with inflation rates closing in on the Fed's target of 2% and the job market remaining robust.
- Economic Uncertainty: Trump's tariffs have created uncertainty for the Fed, making it difficult to predict economic outcomes. This uncertainty has prompted the Fed to adopt a "wait-and-see" approach instead of making immediate rate cuts.
- Geopolitical Factors: The Fed may also be considering the geopolitical landscape, particularly the ongoing tension between Iran and Israel. A potential escalation, including US military involvement, could lead to turmoil in the oil market, raising prices and stalling economic growth.
In light of these factors, the Fed now projects a lower economic growth rate for the year, revising its prediction from 1.7% to 1.4%. It also expects a higher inflation rate of 3.0%, up from its initial projection of 2.7%.
- Interest Rate
- Federal Reserve
- Donald Trump
- Central Bank
- United States
- Economy
- Inflation
- Tariffs
- European Central Bank
- Jerome Powell
- Credit
- Amid ongoing pressure from President Donald Trump, the Federal Reserve (Fed) in the United States has chosen to maintain the key interest rate at a relatively high 4.25-4.5%, despite predictions that it would hold steady based on economic analyses.
- Recognizing the importance of the interest rate for achieving its objectives, the Commission, in a similar context, has also taken a number of steps to ensure that its proposals are implemented in a way that is consistent with the objectives of the common agricultural policy, including monitoring economic conditions, business, finance, and politics, as well as general news.
