The U.S. Federal Reserve has opted to keep its benchmark interest rates unchanged, maintaining the target range at 4.25% to 4.5%, despite mounting pressure from President Donald Trump to implement a rate cut. The decision, announced on Wednesday, underscores the central bank’s cautious stance as it navigates a complex economic landscape marked by both positive growth indicators and lingering uncertainties.
In a statement following the decision, the Federal Open Market Committee (FOMC) noted that economic activity had moderated in the first half of the year, even as the labor market remained strong and inflation stayed above the Fed’s 2% target. “Uncertainty about the economic outlook remains elevated,” the statement read, highlighting concerns about the global economic climate and the potential impact of tariffs.
Recent data from the U.S. Commerce Department showed the economy rebounded with a 3% annualized growth rate in the second quarter, reversing a 0.5% contraction in the first quarter. Meanwhile, the Consumer Price Index (CPI) rose 2.7% in June from a year earlier the largest increase since February raising concerns about inflation being stoked by ongoing tariffs.
Despite this, the FOMC remains divided. Two of the twelve voting members advocated for a 25-basis-point rate cut, while one board member abstained from voting altogether. Fed Chair Jerome Powell emphasized during a press conference that the current policy stance appears appropriate, given the economic data.
“It seems to me, and to almost the whole committee, that the economy is not performing as though restrictive policy is holding it back inappropriately,” Powell stated. He added that the Fed has yet to decide whether to cut rates in its next meeting in September.
Powell also dismissed suggestions that the Fed should consider the federal government’s fiscal position when setting monetary policy. “No advanced economy’s central bank does that,” he asserted, defending the Fed’s independence.
Trump, however, renewed calls for a rate cut, citing strong GDP figures and low inflation. “No Inflation! Let people buy, and refinance, their homes!” he posted on social media.
The Fed’s decision to hold steady signals its continued focus on data-driven policy, even amid political pressure.
