The Federal Reserve has once again opted to hold its benchmark interest rate steady, keeping it in the 4.25% to 4.5% range. This marks the fourth consecutive meeting without a change, despite mounting pressure from President Donald Trump, who has publicly slammed Fed Chair Jerome Powell and called for sharp rate cuts.
The central bank’s latest decision reflects deep caution as it navigates a volatile landscape marked by ongoing trade wars, Middle East tensions, and a flurry of unpredictable policy shifts coming out of Washington. Officials have reiterated their wait-and-see approach, saying more economic clarity is needed before making any moves.
While Trump has taken to social media to demand an aggressive rate slash — even joking about appointing himself to the Fed — Powell and his colleagues remain unmoved. The Fed’s official projections still pencil in two rate cuts before the end of 2025, but with only slight consensus among board members. In fact, the number of officials opposing any cuts has grown.
A big focus for investors this time was the Fed’s updated “dot plot,” a chart reflecting interest rate expectations from each voting member. Released alongside Wednesday’s decision, the plot shows how divided policymakers are about the path forward. Economic indicators have sent mixed signals in recent weeks: inflation remains relatively tame, unemployment is stable, but consumer spending is slipping.
May retail sales fell by nearly 1%, mostly driven by a sharp drop in car sales. Economists suggest this pullback is partly due to Americans rushing purchases earlier this year to beat Trump’s tariffs. Now that those upfront purchases are out of the way, there’s concern about a “demand cliff” in the coming months.
Compounding the uncertainty is the simmering conflict between Israel and Iran, which has sent oil prices swinging and raised fears of broader global instability. Though there hasn’t been a direct impact on U.S. supply lines yet, energy markets remain jittery — something the Fed must now factor into its inflation forecasts.
Despite all this noise, the U.S. job market has held up, which is one reason why the Fed feels no urgency to act. The national unemployment rate sits at 4.2%, with job creation still strong in sectors like healthcare, construction, and professional services. As long as people remain employed and wage growth continues, the Fed believes inflation can be managed without drastic policy shifts.
That’s not stopping Trump from criticizing Powell at nearly every turn. In his latest attack, Trump called the Fed chair a “numbskull” for refusing to slash rates and blamed him for the high cost of interest payments on national debt. However, by law, the Fed operates independently, and Powell isn’t required to factor federal debt into monetary policy decisions.
Trump’s comments have stirred fresh debate about the politicization of the Fed. Analysts worry that if the central bank appears to bow to political pressure, markets could panic, leading to higher long-term rates — the very opposite of what the White House wants.
What remains clear is that the Fed’s hands are tied for now. With so many unknowns — from tariffs to tax reform to potential war — Powell and his team are choosing patience over panic. Investors, meanwhile, are watching closely. Wall Street ended the day slightly higher, signaling cautious optimism that the Fed will remain a steady hand, even as political tempers flare.
Whether or not the Fed cuts rates later this year will likely depend on data yet to come. If inflation ticks up or consumer sentiment dives further, the Fed could shift gears. But for now, it’s holding its ground, leaving Trump fuming and Powell unfazed.
Leo Cruz brings sharp insights into the world of politics, offering balanced reporting and analysis on the latest policies, elections, and global political events. With years of experience covering campaigns and interviewing world leaders, Leo ensures readers are always informed and engaged.
