United States Federal Reserve Holds Interest Rates

In the weeks leading up to today’s interest rate announcement by the FOMC (Federal Reserve Open Market Committee), President Donald Trump has viciously attacked the Chairman of the Federal Reserve, Jerome Powell. In one damning statement the President said on his social media post to “cut rates pre-emptively to help boost the economy,” saying Powell had been “consistently too slow to respond to economic developments”.

President Trump also wrote “There can be no slowing of the economy unless Mr Too Late, a major loser, lowers interest rates now”. This criticism (he has also threatened to replace Chairman Powell) came after Powell’s warning that Trump’s import taxes were likely to drive up prices and slow the economy. Below, the vote on interest rates by the FOMC reflects Chairman Powell’s and the Federal Reserve’s commitment to that warning.

Today the FOMC voted unanimously to hold its key benchmark interest rate at 4.25% – 4.50% where it has remained since December 2024. Confirming the decision, Federal Reserve Chairman Jerome Powell said that officials were not in a hurry to adjust interest rates adding that tariffs could lead to higher inflation and unemployment. Chairman Powell went on to say, “If the large increase in tariffs are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment”.

Experts suggest that the unpredictability of President Trump and his back and forth on tariffs makes it very difficult for the Federal Reserve to predict the future of the economy. However, the statements coming out of the Federal Reserve confirmed that currently the economy is resilient with improving job gains and the economy growing at a solid pace. At the same time, analysts suggest that the Federal Reserve is in a holding pattern as it waits for uncertainty to clear.

Several analysts and experts have said that the Federal Reserve’s monetary policy direction depends on how the risks develop on inflation or jobs, or in a more difficult scenario whether unemployment and inflation risks increase together. If both increase together, the Federal Reserve will have to choose which direction to take monetary policy as a weaker job market calls for rate cuts and higher inflation would call for a tightening of monetary policy.

In his post-statement comments Chairman Powell also added that inflation ignited by tariffs could be short-lived or long-lasting depending on how high tariffs go. Just before the FOMC released their interest rate statement President Trump indicated that he would not back down on the current duties of 145% imposed upon China. The wait and see element of Federal Reserve policy is here to stay for a while with some financial analysts suggesting a cut of 0.25% in interest rates will come in July 2025.