Fed Holds Steady as Trump’s Frustration Mounts
The Federal Reserve decided to maintain its interest rates for the fourth consecutive meeting. This continuous status quo is increasing tensions between the institution and former President Donald Trump, who is pushing for rate cuts.
Interest Rates Remain Unchanged
The Federal Reserve, or Fed, has once again kept its interest rates stable. This decision, which was widely anticipated by financial markets, means that rates will stay between 4.25% and 4.50%. These rates affect the borrowing costs for both companies and individuals.
The current rates have remained unchanged since the December meeting of the central bank. Trump has been increasingly impatient and vocal about the lack of rate decreases.
Trump’s Criticism and Powell’s Response
Before the Fed’s announcement, Trump reiterated his belief that the U.S. has “no inflation” and expressed his desire for rate cuts. He also described Fed Chair Jerome Powell as “stupid” and “politicized.” Trump had initially chosen Powell to lead the institution in 2018, and his term is set to conclude in less than a year.
“Maybe I should go to the Fed. Am I authorized to designate myself?”
—Donald Trump
Trump believes that the current interest rates “cost a fortune in the country” by impacting debt repayment charges. During his press conference, Jerome Powell hinted that the Fed will likely maintain its current stance.
Impact of Customs Duties
The impact of customs duties set by the American executive remains uncertain. Jerome Powell stated that the Fed would make “more wise and better decisions if we are still waiting for a few months or the time it will take to have a real idea of the way in which this will be transmitted to inflation.”
Inflation in the United States currently stands at 3.1% as of April 2024, according to the Bureau of Labor Statistics (BLS).
Economic Forecasts Darken
The updated forecasts from Fed officials also present a more subdued outlook for the U.S. economy. They now anticipate a growth in the gross domestic product (GDP) of 1.4% in 2025, down from the 1.7% previously projected in March and 2.1% in December 2024. Simultaneously, they anticipate accelerating inflation to 3%.
Wall Street’s initial gains diminished after these comments, with the Dow Jones falling by 0.11%, the Nasdaq gaining 0.09%, and the S&P 500 index decreasing by 0.05% around 19:10 GMT. Jerome Powell also noted that customs duties may lead to price increases that could affect the economy, but that it often takes some time before these are noticeable by consumers.
The Fed also slightly noted the expected unemployment rate at 4.5% (compared to 4.4% in March).
