Held Steady: Federal Reserve Skips Rate Cut Despite Trump's Plea
Federal Reserve maintains elevated interest rate in United States. - Federal Reserve maintains elevated interest rates in United States
Here's the scoop:
In a surprising move, the US Federal Reserve kept the interest rate untouched, even though President Donald Trump had been urging for a rate cut. The rate remains in the same ballpark, set between 4.25% to 4.5%, as announced by the Federal Reserve Board (Fed) in Washington.
Now, let's dive into why the Fed refused to budge despite Trump's requests.
Taking a closer look, we find that the federal funds rate has remained unfazed since December 2024, and it's still holding steady through the Fed's first four meetings this year, without any rate hikes or cuts. This reluctance to make a move is a sign of the Fed's "wait-and-see" approach as they take their time assessing the current economic conditions.
Now, you might be wondering how the Fed arrived at this decision. In 2024, the Fed did make some cuts—a whole percentage point to be precise—in an attempt to rein in high inflation. But since then, they haven't felt the need for any further adjustments in 2025. The Federal Open Market Committee (FOMC) is now keeping its focus on two things: maximizing employment and bringing inflation back down to the 2% target in the long run. While they acknowledge that inflation is still somewhat high and economic uncertainty, though diminished, still exists, they believe continuing down the ease-up path without solid evidence to support it could be risky.
Furthermore, it's important to note that the Fed operates independently from political pressure and makes decisions based on economic data and outlooks rather than political considerations. In fact, the Fed has emphasized that they carefully assess incoming data and evolving risks before making any changes to the federal funds rate.
In conclusion, the federal funds rate has remained put at 4.25% - 4.5% for the first half of 2025. The Fed is keeping a close eye on inflation and employment, aiming to return inflation to 2% while supporting maximum employment. Their determination to stick it out without succumbing to political pressure and a cautious economic outlook are the driving factors behind their decision to maintain the status quo amid persistent inflation pressures and a still robust economy.
[1] Fed Keeps Rates Steady, Remains Cautious on Rate Cuts - CNBC[2] The Fed’s Patient Wait Is Costing the U.S. Economy - Bloomberg[3] Fed Holds Rates Steady Despite Trump's Pressure for Cuts - Reuters[5] Fed focuses on job market and inflation in keeping rates steady -The Washington Post
The Fed's employment policy aligns with their focus on maximizing employment, while their finance policy is centered around managing inflation and bringing it back down to the 2% target in the long run. Political considerations do not influence the Fed's business decisions, as they independently assess economic data and outlooks before making changes to the federal funds rate.
