The Federal Reserve will likely hold interest rates steady after its meeting on Tuesday and Wednesday, despite political pressure from President Donald Trump calling for rate cuts. Between 2022 and 2023, the Fed hiked rates to combat post-pandemic era inflation, and the current rate sits at 4.3%.
President Trump has insisted that inflation has cooled and rates should come down. In a post on Truth Social, he said there is “no inflation” and highlighted strong employment rates, declining gas, energy and mortgage costs. However, while inflation did drop in March, it still sits at 3.6%, above the Fed’s 2% target.
Grocery prices remain elevated, increasing 0.5% in the past three months and up 2.4% from a year ago. While gas prices are down 10% year-over-year, AAA reports a national average of $3.18 per gallon–a 60% discrepancy from Trump’s claim of $1.98.
Federal Reserve Chair Jerome Powell and other officials want to wait to assess the economic impact of President Trump’s tariffs before adjusting rates. Without tariffs, economists suggest the Fed may have been positioned to cut rates, given that the current level is meant to slow borrowing, spending and cool inflation. However, the uncertainty of the tariff policy and the likelihood of broad price increases complicate the situation further.
The Trump administration continues to apply pressure to the Fed. Two weeks ago, Trump publicly stated he would like to fire Powell, sparking a stock market selloff. He later backpedaled, saying he had no intentions of removing Powell. However, he and his administration continue to press for rate reductions.
If the Fed cuts rates amid ongoing pressure from the White House, it risks appearing politically swayed. However, if tariffs slow economic activity and lead to rising unemployment, the Fed may be forced to act and reduce rates in the coming months.
