Federal Reserve Holds Interest Rates Steady Amid Trump’s Calls for Cut
The Federal Reserve announced on Wednesday that it would maintain the current level of interest rates, a decision that may put it on a potential collision course with President Donald Trump, who had called for the central bank to lower rates just days earlier. Federal Reserve Chair Jerome Powell declined to comment on Trump’s demand, citing the norm of independence and saying that the public should be confident that the Fed will continue to do its work.
The Fed had lowered interest rates by a percentage point over the final months of last year in a bid to combat inflation and support the economy. However, Powell said in January that the central bank may proceed at a slower pace with future rate cuts, citing concerns about inflation and the uncertainty tied to potential policy changes under Trump.
The decision to maintain interest rates pauses a series of three consecutive rate cuts imposed by the Fed over the final months of 2022. The central bank remains attentive to concerns about both a rise in unemployment and a surge in inflation, and is judging that the risks to achieving its dual mandate are roughly in balance.
Trump had spoken out in favor of lower interest rates during a virtual address to the World Economic Forum in Davos, saying that the prospect of low oil prices would enable the Fed to dial back its fight against inflation and bring down interest rates. However, Powell declined to comment on Trump’s remarks, and the Fed is unlikely to respond to direct political interference.
Despite the decision to hold interest rates steady, the Fed indicated last month that it would cut interest rates at a slower pace than it had previously forecast, due to concerns about inflation. The Fed’s target rate of 2% remains well above the current rate of nearly 3.5%.
