Fed Expected to Hold Interest Rates Steady Despite Trump Pressure/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The Federal Reserve is expected to leave interest rates unchanged this week despite mounting pressure from President Trump and his administration to cut borrowing costs. Ongoing inflation concerns, Trump’s new tariffs, and the Fed’s desire to maintain credibility are influencing the decision, with rate cuts unlikely before late summer.
Fed Likely to Hold Rates: Quick Looks
- No Rate Cut Expected: Fed likely to keep rates at 4.3% despite Trump’s push.
- Trump’s Pressure Builds: President and Treasury Secretary demand cuts, citing “no inflation.”
- Tariffs Complicate Outlook: Trump’s broad tariffs could push inflation higher.
- Fed Chair Powell Under Fire: Trump briefly suggested firing Powell but later backed off.
- Independence at Stake: Analysts warn cutting rates now would appear politically motivated.
- Inflation Still Above Target: March data shows 3.6% inflation, Fed’s target is 2%.
- Musk Criticizes Fed Spending: Elon Musk questions $2.5 billion building renovation.
- Rate Cut Timeline Shifted: Economists now see cuts possible by September or later.
- Investor Outlook Mixed: Markets still expect a cut by July, depending on tariffs’ impact.
- Powell Emphasizes Caution: Fed will wait for sustained data before any policy shift.
Fed Expected to Hold Interest Rates Steady Despite Trump Pressure
Deep Look
As the U.S. economy grapples with persistent inflation and new political dynamics, the Federal Reserve is poised to leave its benchmark interest rate unchanged this week, resisting intensifying political pressure from President Donald Trump and his top advisers.
The Fed’s decision, expected Wednesday, comes amid Trump’s calls to cut rates, including a recent post on Truth Social declaring there is “NO INFLATION” and urging immediate rate reductions. He also claimed that grocery prices were falling and gas had dropped to $1.98 per gallon — a figure far below AAA’s national average of $3.18.
In reality, grocery prices have risen 2.4% year-over-year, and while gas prices have declined, the drop is partly tied to fears of economic slowdown — a factor that could weigh on the Fed’s decision but doesn’t erase inflationary concerns.
The Fed’s key interest rate, currently at about 4.3%, has been held steady for months following sharp hikes during 2022 and 2023 in response to post-pandemic inflation, which peaked at 9.1% in June 2022. Inflation has cooled, but not enough to meet the Fed’s 2% target. In Q1 of 2025, the Fed’s preferred gauge showed inflation at 3.6%.
Complicating the Fed’s path forward are Trump’s broad tariffs, which economists say will likely push consumer prices higher in the coming months. Chair Jerome Powell has warned that these tariffs could contribute to both rising inflation and slower economic growth — a combination that makes interest rate policy especially complex.
“There’s a risk the Fed appears to bow to pressure,” said Preston Mui, economist at Employ America. “Even if data supports a cut, doing it now would look politically motivated.”
Indeed, Trump’s criticism of Powell and brief suggestion two weeks ago that he might fire the Fed chair sparked alarm in financial markets. Though Trump has since walked back that idea, the Fed remains under unusual political scrutiny, despite being an independent agency.
Fed officials, including Powell, have signaled caution, preferring to wait until the effects of Trump’s tariffs are clearer. That likely delays any potential rate cut to September or later, unless the economy softens significantly before then.
Economist Vincent Reinhart of BNY said the Fed is “scarred” by its 2021 misstep, when it labeled early inflation spikes as “transitory.” That mistake delayed rate hikes and contributed to the sharp inflation peak. “This time they will be more cautious,” Reinhart said.
Still, markets remain optimistic, with many investors betting on a rate cut as early as July, especially if tariffs dampen consumer demand or fuel layoffs.
Meanwhile, Elon Musk, now serving in the Trump administration as head of the Department of Government Efficiency, added to the Fed criticism last week, slamming the central bank for its $2.5 billion renovation project at its Washington headquarters.
“Since this is all taxpayer money, we should absolutely review whether the Fed needs a $2.5 billion interior designer,” Musk quipped.
Fed officials responded that construction costs have surged due to inflation in labor and materials. Additionally, zoning restrictions forced the Fed to expand underground instead of vertically, contributing to the high price tag.
Kevin Warsh, a former Fed governor and potential replacement for Powell when his term ends in 2026, also criticized the central bank during an IMF conference, claiming the Fed’s current challenges are “self-inflicted.”
“A strategic reset is necessary,” Warsh said, citing concerns about inflation control, political credibility, and the Fed’s involvement in global climate discussions.
Despite these attacks, Powell reaffirmed last month that “Fed independence is widely understood and supported in Congress,” a pointed reminder that decisions on interest rates will be driven by data — not politics.
In the coming weeks, all eyes will remain on inflation trends, employment reports, and global trade data to determine when the Fed might move. For now, though, expect Powell and company to hold the line — even in the face of mounting pressure from the White House.
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