US Federal Reserve meeting today: Under pressure from Donald Trump, will Jerome Powell hold interest rates?
The US Federal Reserve will announce its first monetary policy decision of 2025, expected to keep interest rates at 4.50%.
The US Federal Reserve is set to announce its first monetary policy decision of 2025 on Wednesday that will also be the first time under the new Donald Trump administration.
Expectations are that the Jerome Powell-led agency would keep the federal interest rates unchanged at 4.50 per cent. The move, going by the expectations, will probably not sit well with Donald Trump, who has consistently called for lower interest rates.
Policymakers are likely to maintain rates as they assess the trajectory of inflation and the impact of the new administration’s economic policies. The Fed last cut interest rates by 25 basis points in December 2024 following three consecutive reductions since September. However, inflation is still above the 2 percent target and that might prompt a wait-and-watch approach from the Fed.
The decision will be announced after the agency’s two-day meeting concludes. Federal Reserve chairman Jerome Powell is scheduled to address the media at 2:30 pm EST (1 am IST, Thursday). The remarks will be watched for signals on future rate cuts and the Fed’s economic outlook.
Credit data and lending trends are also expected to be key considerations in the meeting. While economic growth remains solid, borrowing costs remain elevated, adding to the uncertainty around the pace of future monetary easing.
A renewal of Donald Trump and Jerome Powell’s fractious relationship
The decision by Jerome Powell and the Federal Reserve might mark a renewal of what was a fractious relationship between them and Donald Trump. Trump nominated Powell for the Fed's top job in late 2017 but soon turned on his appointee after Powell proceeded with rate hikes that the Republican president disagreed with.
Since taking office on January 20, Trump has maintained his old stance and said that he would "demand" lower rates. The US President believes that the Fed should take his views into account.
Powell might have to answer questions on Wednesday about Trump's comments, and if past practice holds, he is likely to say that the Fed officials leave politics out of their decision-making process.
The Fed will not issue new economic or monetary policy projections at the end of this week's meeting, but data since December has kept the central bank's core outlook intact of an economy with inflation slowly easing and firms continuing to hire.
Projections issued at the end of the policy meeting last month showed Fed officials anticipated two quarter-percentage- point rate cuts this year, "if the data came in about as expected."
It's the uncertainty and the risk of unanticipated shocks that may weigh on the Fed's decisions.
Policymakers have said they generally have faith in inflation's continued decline to the 2 percent goal from current levels about half a percentage point above that.
Investors, however, currently do not anticipate any further rate cuts until June, and by then the scope of Trump's plans and their impact on the economy should be clearer, with elected officials facing important near-term decisions over issues like the federal debt limit and Republican lawmakers debating initial tax and spending legislation.
(With input from Reuters)
