The Federal Reserve kept interest rates steady for the fourth consecutive meeting, signaling continued caution amid economic uncertainty, despite projecting weaker growth and higher inflation than just three months ago. Even with the stagnation in rates, Fed officials still anticipate two cuts before the end of the year.
This decision puts the central bank squarely at odds with President Trump, who has been pressuring the Fed to lower rates immediately. The Fed has so far resisted those calls, warning that rapid policy shifts in an already volatile environment could stoke inflation and damage job growth.
The Federal Open Market Committee announced it would maintain its benchmark rate in the range of 4.25% to 4.5%, a level unchanged since December. However, officials still expect the rate to drop to 3.9% by year’s end, mirroring their March projection and suggesting two cuts could still come later this year. Expectations for 2026 have shifted, with only one rate cut now anticipated, down from two.
In its statement, the Fed acknowledged that uncertainty has eased somewhat but remains “elevated,” adjusting its prior language which said uncertainty had “increased further.” The decision was supported unanimously by the committee.
Updated projections show the Fed now expects inflation to hit 3% in 2025, up from the 2.7% forecast earlier this year. The unemployment rate is also expected to rise slightly to 4.5%, while GDP growth has been downgraded to 1.4% from 1.7%.
These revisions come in the wake of Trump’s announcement of “Liberation Day” reciprocal tariffs, which shook financial markets and sparked fears of a recession. Although some trade tensions have since eased following new deals, businesses remain wary, and risks tied to global supply chains continue to loom large.
Despite this, the Fed is holding off on cutting rates until it becomes clearer whether rising inflation or a softening labor market poses the greater threat to its dual mandate of price stability and full employment.
Fed Chair Jerome Powell emphasized during a press conference that the fundamentals of the economy remain intact. “Wages and job creation are still strong,” he said, noting a slow but steady cooling rather than anything alarming. “We believe staying put is the prudent course for now.”
But President Trump is not holding back in his criticism. Pointing to recent inflation data as a reason to act, he accused Powell and the Fed of dragging their feet. “We have a man who just refuses to lower the Fed rate,” Trump said earlier in the day. “He’s not a smart person. I don’t even think it’s about politics. I think he just hates me, but that’s OK.”
Trump’s comments underline the growing divide between his administration and the Fed a clash that could intensify as economic pressures mount and election season approaches.