The Federal Reserve’s unanimous decision on Wednesday to keep interest rates unchanged, that is, between 4.25% and 4.50%, sets a tense economic summer, as would be said. It is the third straight meeting without a rate change, standing in stark opposition to President Donald Trump‘s public pressure campaign for lower rates.
Powell: “Uncertainty Is Extremely Elevated”
Fed Chair Jerome Powell, speaking at a press conference, emphasized that the central bank is taking a measured approach as it watches the fallout from Trump’s sweeping tariff agenda.
“My gut tells me that uncertainty for the path of the economy is extremely elevated,” Powell said.
While he acknowledged growing risks, Powell stressed the Fed is in “no hurry” to cut rates until there’s clearer data on how the tariffs are impacting jobs and inflation. He also pointed out that trade talks underway with global partnerscould shift the economic outlook in either direction.
Trump’s Call for Cuts, Fed’s Firm Stand
The decision comes amid a very public push by Trump to lower interest rates — a move he believes would help counterbalance the effects of his own trade war. But the Fed’s stance suggests a reluctance to respond to political pressure, especially with tariff-driven inflation concerns on the rise.
Just last week, Trump branded May 1 as “Liberation Day,” kicking off a round of triple-digit import tariffs that spooked markets and prompted companies to front-load imports, contributing to a rare GDP contraction in Q1 — the first in three years.
What the Fed Is Watching
Despite headwinds, the Fed noted that the U.S. economy is still expanding at a “solid pace”, and the labor market remains resilient, with unemployment stable.
Still, officials flagged rising risks to both inflation and unemployment, cautioning that the full economic impact of Trump’s trade war could take months to materialize.
The Fed is walking a tightrope — trying to maintain stability while Trump accelerates economic disruption through aggressive trade policies. For now, Powell and the Fed are standing their ground, prioritizing data over politics, and sending a clear message: they won’t be rushed.
