US Fed keeps interest rates unchanged in face of Trump criticism

Federal Reserve Board Chairman Jerome Powell speaks during a press conference. This followed a closed two-day meeting of the Federal Open Market Committee on interest rate policy in Washington. (REUTERS/Kevin Lamarque)

WASHINGTON, United States —The US Federal Reserve (Fed) held interest rates steady for a fourth consecutive meeting Wednesday. It forecast higher inflation and cooler growth this year as President Donald Trump’s tariffs begin to take hold and geopolitical uncertainty swirls.

Fed Chair Jerome Powell told reporters the central bank would make better decisions if it waited a few months to understand how tariffs impact inflation, spending and hiring. It is a sign that the next rate adjustment could take some time to materialize.

For now, he expects to learn more “over the summer.” Meanwhile, officials appear increasingly divided on whether they can cut interest rates at all in 2025.

READ: US Federal Reserve could cut rates if tariffs reduced, says official

The Fed kept the benchmark lending rate at a range between 4.25 percent and 4.5 percent at the end of its two-day meeting. Officials penciled in two rate reductions this year, similar to earlier projections.

But there was growing divergence among Fed officials participating in the meeting. A smaller majority expected the central bank to lower rates at least twice.

Trump calls Fed’s Powell ‘stupid’

The Fed’s decision is likely to draw the ire of Trump, who has repeatedly pressured the independent central bank for rate cuts. On Wednesday, Trump called Powell “stupid” for not slashing rates more quickly.

“We have a stupid person, frankly, at the Fed,” Trump said, hours before the bank was due to release its policy decision.

“We have no inflation, we have only success, and I’d like to see interest rates get down,” he added, speaking at the White House. “Maybe I should go to the Fed. Am I allowed to appoint myself?”

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The Fed said in a statement that “uncertainty about the economic outlook has diminished but remains elevated.”

The central bank also cut its expectations for economic growth this year and raised its inflation and unemployment forecasts. This was its first updated projections since Trump in April unleashed sweeping 10 percent tariffs on almost all trading partners.

“Increases in tariffs this year are likely to push up prices and weigh on economic activity,” Powell said.

Avoiding a more persistent impact depends on the size of levies’ effects, how long it takes for them to pass through to prices, and keeping expectations anchored, he added.

Fed is ‘well-positioned’

Powell maintained that the Fed is “well-positioned to wait to learn more” before considering changes to interest rates.

“Because the economy is still solid, we can take the time to actually see what’s going to happen,” Powell said. “We’ll make smarter and better decisions if we just wait a couple of months.”

The Fed’s call was in line with analysts’ expectations.

As officials anticipate more clarity on the impact associated with higher tariffs over the summer, “financial markets are not expecting any movement in rates prior to September,” said KPMG chief economist Diane Swonk.

Major US indexes ended little-changed on Wednesday.

Ryan Sweet, chief US economist at Oxford Economics, said the Fed would want evidence that inflation is headed back to its two percent target “before sounding all clear.”

“Preemptive rate cuts don’t appear to be on the table, implying the bar is high for the central bank to cut in July,” Sweet said.

Swonk said however “there is a very strong argument that absent the tariff-induced inflation, the Fed would be cutting rates now.” Swonk noted that the labor market is slowing.

On Wednesday, the Fed cut its expectations for 2025 economic growth to 1.4 percent. This was from its March projection of 1.7 percent.

It also raised its inflation forecast to 3 percent and that of the unemployment rate to 4.5 percent.

Asked about conflict in the Middle East as a clash between Israel and Iran heats up, Powell said that although it was possible to see higher energy prices, these “don’t generally tend to have lasting effects on inflation.”