Policymakers at the Federal Reserve voted 9-2 to maintain current interest rates, despite significant pressure from President Trump to reduce borrowing costs.
The Federal Reserve decided on Wednesday to keep its benchmark interest rate between 4.25% and 4.5%, resisting calls from President Trump to lower it. This decision influences the borrowing costs for businesses and consumers, with many investors speculating that a rate cut could occur at the Fed’s next meeting in September.
Since reducing interest rates by a full percentage point last year, the Federal Reserve has held rates steady, waiting to assess the impact of President Trump’s new tariffs and other policies on the economy. Trump has frequently criticized Federal Reserve Chair Jerome Powell for not reducing rates faster, derisively assigning the nickname “Too Late” to Powell.
The White House also expressed concerns about cost overruns related to a $2.5 billion renovation of two Federal Reserve buildings in Washington. Tensions heightened last week when Trump and Powell had a verbal exchange during a building tour, with Trump allegedly inflating the project’s cost to over $3 billion. Powell corrected him, explaining that this higher figure included a third building completed earlier.
Despite these interactions, Powell maintains that the president’s personal attacks have not influenced his policy decisions. “I’m very focused on just doing my job,” he said at a central bankers’ meeting in Portugal. With over ten months left in his term, which expires next May, Powell expressed a desire to leave the economy in a stable condition for his successor.
The debate over interest rates continues as inflation remains above the Federal Reserve’s 2% target. Economists are concerned that Trump’s tariffs might further increase prices. For instance, consumer prices rose by 2.7% in June compared to the previous year, marking a more considerable annual increase than in the preceding month.
Yet, with unemployment still low, the Federal Reserve faces little immediate pressure to cut borrowing costs. The Labor Department’s upcoming report on July’s job gains, due on Friday, could further influence the central bank’s future policy decisions.
According to NPR, the Federal Reserve’s cautious approach reflects a broader strategy to balance economic growth with price stability amid ongoing political and economic challenges.
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