Just hours before the Federal Reserve’s announcement, President Donald Trump called Fed Chair Jerome Powell “stupid” for expected plans to keep interest rates steady. But Powell stood his ground.
The Federal Reserve decided to hold interest rates at their current levels, ignoring the president’s demands to lower them. Despite Trump’s public insults and pressure, the Fed made it clear that its decisions are based on data, not politics.
Trump had said, “He’s a political guy who’s not a smart person, but he’s costing the country a fortune.” Still, the Fed stayed firm.
The central bank also warned that tariffs imposed by Trump could push prices higher this summer.
“Increases in tariffs this year are likely to push up prices and weigh on economic activity,” Powell said. “The effects on inflation could be short-lived, reflecting a one-time shift in the price level. It’s also possible that the inflationary effects could be more persistent.”
The Fed raised its inflation forecast to 3% for the year, up from 2.7%, and lowered its estimate for economic growth to 1.4%. This shows the ongoing impact of Trump’s tariff policies on the economy.
After its meeting, the Fed said, “Uncertainty about the economic outlook has diminished but remains elevated.” The central bank kept the federal funds rate between 4.25% and 4.5%.
Looking ahead, most Fed officials expect to cut rates twice in 2025, but some do not expect any cuts this year. Powell said, “We have a pretty healthy diversity of views on the committee,” reflecting differing opinions on the economy and policy.
The Fed emphasized that the economy is still growing steadily. “The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated,” the committee said.
Powell also expressed concern about budget cuts to agencies that produce economic data. He warned this could cause “more volatility” in surveys and hurt the Fed’s ability to understand the economy.
“The United States has been a leader for many, many years in this whole project of measuring, and understanding what’s happening in our very large and dynamic economy,” Powell said. “And I hate to see us cutting back on that, because it is a real benefit to the general public.”
Despite Trump’s harsh words, the Fed made clear it will act based on economic facts — not presidential pressure.
