Fed leaves interest rates unchanged despite Trump’s calls for cuts

As the board concluded a two-day series of meetings, the Federal Reserve maintained interest rates unchanged on Wednesday in spite of President Donald Trump’s pleas for rate reduction.

In order to make borrowing more accessible for Americans, President Trump has advocated for lower interest rates. Jerome Powell, the chair of the Federal Reserve, has cautioned that tariffs are already causing inflationary concerns. Additionally, the Fed stated that it is keeping an eye out for any shifts in employment levels.

The Fed is now content with U.S. employment data despite high inflation.

“The level of uncertainty around the economic outlook is quite high. The Federal Reserve stated in a statement on Wednesday that the Committee is aware of the risks to both sides of its dual mandate.

By a vote of 9 to 2, the board decided to keep interest rates as they are. With Wednesday’s decision, some Fed members dissented for the first time in more than thirty years.

President Trump selected Governors Michelle Bowman and Christopher Waller, both of whom voted to reduce rates.

As stated by Thomas Stockwell, assistant professor of economics at Tampa University, “by the time they finish the meeting, all 12 of them are usually in lockstep.” “Most of the time, a policy measure will receive the support of all 12 members. There will occasionally be one or possibly two persons who disagree. However, the more dissidents you encounter, the more you begin to wonder if the chairman truly has authority over the FOMC.

Although he did not specifically mention Powell, President Trump continued to attack the Fed’s performance on Wednesday, the day before the rate decision. Regarding Wednesday’s rate announcement, President Trump has not yet made any public remarks.

The practice known as de minimis exclusions, which applied to low-cost shipments, may come to an end when President Trump announces new duties on Brazil and India, on copper imports to the United States, and on some products valued under $800.

According to the president, tariffs increase domestic output and bring in money.

Powell stated that those tariffs are anticipated to continue to influence Fed decision-making, especially when costs are transferred to consumers.

“For now, the majority of this is being paid for by the customers. Consumer prices are beginning to reflect it,” Powell stated on Wednesday. “We anticipate more of that. According to polls, businesses believe they have every intention of communicating this to customers.

“I think we’ve learned that the process will probably be slower than expected at the beginning, but we never expected it to be fast.”

In order to fight excessive inflation, federal interest rates rose to their highest levels in more than 20 years in 2023 and 2024. According to Powell, the Federal Reserve wants to maintain inflation at a 2% yearly rate.

The Federal Reserve lowered interest rates three times in 2024 as inflation decreased, but since President Trump took office in January, no further rate cuts have been enacted.

The 12-month period ending in June saw a 2.7% increase in the consumer price index, according to figures released earlier this month. Compared to May’s rate of 2.4%, the inflation rate is 0.3 percentage points higher.

President Trump stated, “We would be helped if interest rates come down,” but he also acknowledged that any changes would be the responsibility of the Federal Reserve Board.