Fed likely to hold rates steady despite Trump call for cuts as it awaits tariff, immigration changes
President Donald Trump may want lower interest rates, but the Federal Reserve will almost certainly keep its benchmark interest rate unchanged at its two-day policy meeting that ends Wednesday
WASHINGTON — President Donald Trump may want lower interest rates, but the Federal Reserve will almost certainly keep its benchmark interest rate unchanged at its two-day policy meeting that ends Wednesday.
It is likely to be a quiet start to an eventful year for the central bank. Trump said last week in Davos, Switzerland that he would bring down energy prices, then “demand” that the Fed lower borrowing costs.
Later, when asked by reporters if he expected the Fed to listen to him, he said, “yes.” Presidents in recent decades have avoided publicly pressuring the Fed out of deference to its political independence.
Outside of a U.S. President bending norms, the Fed also faces challenges in achieving its economic objectives. Inflation remains above its 2% target: Its preferred measure is at 2.4%, though core prices — considered a better gauge of where inflation is headed — rose 2.8% in November from a year ago.
Fed officials, led by Chair Jerome Powell, want to thread a moving needle: By keeping borrowing costs higher, the Fed hopes to slow borrowing and spending enough to reduce inflation, but without causing a painful recession.
Powell said in December that the central bank has entered a “new phase,” in which it expects to move more deliberately after cutting its key rate to 4.3%, from 5.3% in the final three meetings of 2024. In December, Fed officials signaled they may reduce their rate just twice more this year. Goldman Sachs economists believes those cuts won't happen until June and December.
A cut in March is still
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