The Federal Reserve maintained the stable interest rates on Wednesday, only weeks after President Donald Trump intensified the calls for lower indebted costs and expressed the enthusiasm for the possible “termination” of the president of the Fed, Jerome Powell.
In recent days, Trump has delayed his attacks against Powell, saying that he will not fire Powell before the end of the central banker’s mandate next year. However, Trump has reiterated his disgust with the level of interest rates, urging the Central Bank to reduce them.
Speaking at a press conference in Washington, DC, on Wednesday, Powell said the economy remains in “solid form”, but warned that Trump’s tariff policy could cause greater inflation and economic slowdown.
“If the great increase in tariffs that have been announced are sustained, they are likely to generate an increase in inflation and a slowdown in economic growth,” Powell said Wednesday.
“However, all these policies are evolving and their effects on the economy are still very uncertain,” Powell added.
When asked about Trump’s call for lower rates, Powell shrunk criticism from the president.
“It does not affect our work at all,” Powell said. “We will always consider only economic data, perspectives, risk balance, and that’s.”
The measure marked the second consecutive decision of the Fed to maintain the current level of interest rates, repeating an approach adopted in January. Before that, the Fed had reduced rates in three consecutive meetings.
“For now, it seems a fairly clear decision for us to wait and see,” Powell said.
The Federal Open Market Committee (FOMC), a policy formulation agency in the FED, said Wednesday that key economic indicators had improved, but warned the greatest economic uncertainty.
“The risks of greater unemployment and greater inflation have increased,” the FOMC said in a statement.
Last month, Powell raised the possibility that Trump’s tariffs can cause what economists call “stagflation”, which is when inflation increases and the economy slows down.
If the Fed increases interest rates as a means to protect against inflation induced by the rate in this scenario, run the risk of querying loans and slowering the economy further. On the other hand, if the Fed reduces rates to stimulate the economy against a potential deceleration, threatens to increase spending and make inflation worse.
Even so, Powell pointed out a solid economic performance as a reason to adopt a patient approach while policy formulators expect the impact of tariffs.
“At the moment, we are well positioned to expect greater clarity,” Powell told a audience at the Chicago Economic Club.
Powell pointed out the possibility of a change in economic conditions, saying: “Life moves quite fast.”
The rate decision comes days after new data showed solid employment growth in April.
Despite marking the feeling of the consumer and market agitation, the labor market has provided a brilliant point since Trump assumed the position. Meanwhile, inflation cooled in March, the most recent month for which the data is available.
Even so, recession fears are increasing on Wall Street while Trump tariffs threaten to fly global trade. Goldman Sachs earlier this month rose its probabilities of a recession from 35% to 45%. JPMorgan set the probability of a recession this year to 60%.
A government report last week showed that the US economy was reduced in the first three months of 2025, a large part of which took place when the burst of Trump rates proposals fueled uncertainty between companies and consumers.
The president of the Federal Reserve, Jerome Powell, speaks at the Chicago Economic Club, on April 16, 2025, in Chicago, Illinois.
Kamil Krzaczynski/AFP through Getty Images
The Gross Domestic Product of the United States, or GDP, decreased to an annualized rate of 0.3% for three months that ended in March, according to government data published Wednesday. The figure marked a strong drop in 2.4% annualized growth during the last three months of 2024.
Wednesday’s rate also marks the first adjustment of indebtedness costs since Trump closely observed the announcement of the “Liberation Day” rate on April 2, which triggered the greatest drop in the one-day stock market falls from the COVID-19 pandemic.
Days later, Trump suspended a large strip of tariffs, sending the market to one of its greatest increases of a single day. A simultaneous escalation of tariffs on Chinese products maintained the effective rate rate at its highest level in more than a century, the Yale Budget Laboratory found.
The White House seeks to attack trade agreements with dozens of commercial partners of the United States before the 90 -day suspension of the so -called “reciprocal rates” expires in July.
“As we better understand policy changes, we will have a better sense of implications for the economy,” Powell said last month.
