US Federal Reserve Maintains Interest Rates Despite Trump Pressure

The US Federal Reserve has maintained interest rates and signalled two potential cuts this year, amidst mounting pressure from President Trump for monetary easing. The central bank held its benchmark borrowing costs between 4.25 per cent and 4.5 per cent, aligning with market predictions.

The Fed’s influential “dot plot” of monetary policy forecasts reinforced expectations of two rate cuts in 2025, consistent with March projections. Market observers had speculated the rate cut forecast might be reduced to one this year. Economic growth forecasts were revised downward to 1.4 per cent, while inflation projections increased to 3 per cent, reflecting trade-related economic uncertainties.

Jerome Powell, Fed chairman, faces intensifying criticism from Trump, who recently labelled him a “numbskull” and threatened intervention in central bank policy. The Fed’s last rate adjustment occurred in December, with no subsequent changes due to concerns over White House trade policies and inflation expectations.

The central bank’s statement emphasised that “uncertainty about the economic outlook has diminished but remains elevated.” Labour market conditions remain robust, though inflation continues above target levels. The Fed anticipates inflation returning to its 2 per cent target by 2027.

Trade tensions continue to influence monetary policy decisions, with Powell identifying tariffs as a “driving force” behind elevated short-term inflation expectations. The president’s recent 90-day tariff pause expires on 9 July, while Chinese import duties have decreased from 145 per cent to 55 per cent following bilateral negotiations.

The Fed’s cautious stance contrasts with more aggressive rate-cutting approaches from the European Central Bank and Bank of England, who respond to weakening labour markets and potential deflationary pressures from American tariffs. Ten Fed rate-setters support two cuts this year, while seven advocate maintaining current rates.