Fed Reserve maintains elevated interest rates in the United States
The Federal Reserve has held interest rates steady at the range of 4.25% to 4.5%, marking the fifth consecutive meeting where the key interest rate remains unchanged[1][2][3]. This decision comes despite pressure from President Trump to lower rates.
The Federal Open Market Committee (FOMC) cited uncertainty over the economic outlook, solid labor market conditions, and somewhat elevated inflation as reasons to pause rate cuts[1][2][3]. However, there was rare dissent within the FOMC, with two members, Governors Michelle Bowman and Christopher Waller, voting in favor of reducing rates[2].
Economic growth in the first half of the year has slowed, and market observers expect the first interest rate cut as early as the September meeting[4]. Tariffs, borne by importers, retailers, and consumers in the US, have contributed to this economic slowdown. The International Monetary Fund (IMF) has expressed concern about partly increased import prices in the US due to tariffs, with companies starting to pass on higher costs to their prices[5].
President Trump has been vocal about his desire for lower interest rates, verbally attacking Fed Chair Jerome Powell and calling him names such as "fool," "idiot," and "dumb guy." However, Trump has recently changed his tune about firing Powell, stating that it's a big step but not necessary[6].
Powell favors a cautious monetary policy and is hesitant to lower rates, as the US labor market has remained robust. Powell sees inflation risks resulting from Trump's trade policies as outweighing the benefits of a rate cut. It is important to note that Powell does not decide on the key rate alone - the Federal Open Market Committee does[7].
Rumors suggest that Waller, who voted for a rate cut, has ties to Trump, with the U.S. president reportedly considering him, along with Treasury Secretary Steven Mnuchin, as a potential successor to Powell[8]. The deficit is expected to increase by around $3.3 trillion (approximately €2.8 trillion) over the next decade due to Trump's new tax law[9]. Uncertainty about economic prospects remains high.
References: 1. Federal Reserve Decision 2. Bloomberg News 3. CNN Business 4. MarketWatch 5. IMF Statement 6. CNN Politics 7. The Balance 8. Bloomberg News 9. CBO Report
- The high-level uncertainty over the economic outlook, along with the robust labor market conditions and elevated inflation, have led the Federal Open Market Committee (FOMC) to withhold finance policy changes, despite pressure from politics, such as President Trump's calls for lower interest rates.
- Governor Christopher Waller, who voted in favor of reducing rates during a rare dissent within the FOMC, is reportedly under consideration by President Trump as a potential successor to Fed Chair Jerome Powell in the business of politics, adding another layer of complexity to the general-news landscape.
