The Federal Reserve has decided to hold its benchmark interest rate steady, maintaining the target range of 4.25% to 4.5%. Even with persistent inflation and the rising impact of Trump tariffs, the Fed continues to rely on the resilience of the Labor Market and overall economic strength.
This recent FOMC meeting signals a cautious yet stable approach, showing that the Fed wants to monitor incoming data before deciding on any Interest Rate cuts.
Summary
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Federal Reserve holds interest rates at 4.25% to 4.5%.
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Inflation remains above 2% target; PCE may reach 3%.
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Trump tariffs expected to fuel further inflation.
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Labor market remains strong; unemployment rate at 4.2%.
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Two Interest Rate cuts still possible in 2025.
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Fed continues to reduce treasury securities and debt holdings.
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Jerome Powell remains confident about economic strength despite global risks.
Jerome Powell is a Stupid Person says US President Donald Trump.
Despite the Federal Reserve’s steady approach, the decision has sparked political backlash. US President Donald Trump has openly expressed his dissatisfaction with the unchanged Interest Rate, criticizing the policy as too restrictive during a time when he wants to boost economic growth. He even went so far as to call Chairman Jerome Powell a “stupid person” — highlighting ongoing tensions between the White House and the Fed.
Economic Outlook and Fed Interest Rate Decision
Despite fluctuations in net exports, economic activity has expanded at a healthy pace. The unemployment rate stays low at 4.2%, and the labor market remains strong. However, inflation remains above the Fed’s 2% target — with the Consumer Price Index (CPI) at 2.4% and the Personal Consumption Expenditures Price Index (PCE) projected to reach 3% by the end of the year.
Dual Mandate In Focus
The Fed is firmly committed to its dual mandate — ensuring maximum employment and stable prices. Although uncertainty has decreased, it remains significant due to global tensions and the effects of Trump Tariffs.
Steady Policy, Flexible Strategy
While the Fed is holding Interest Rate steady, it remains open to adjustments if risks arise. It will continue reducing its holdings of Treasury securities, agency debt, and agency mortgage‑backed securities to maintain balance in the Financial Markets.
Jerome Powell’s Post Fed Interest Rate Press Conference
At the press conference, Fed Chair Jerome Powell highlighted that the economy is robust enough to justify a patient approach. He acknowledged that the Trump administration’s tariffs will likely increase inflation in the coming months but stressed that the Fed is well positioned to observe and respond as needed. Powell confirmed that while tariffs pose risks, the strength of the labor market allows the Federal Reserve to hold off on immediate rate cuts.
Voting for this monetary policy decision were Jerome H. Powell (Chair), John C. Williams (Vice Chair), Michael S. Barr, Michelle W. Bowman, Susan M. Collins, Lisa D. Cook, Austan D. Goolsbee, Philip N. Jefferson, Adriana D. Kugler, Alberto G. Musalem, Jeffrey R. Schmid, and Christopher J. Waller.
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