The Federal Reserve will announce its latest decision on whether to cut interest rates on Wednesday and has faced mounting political pressure from the Trump administration to lower rates to spur the economy.
The Fed is widely expected to leave interest rates unchanged this week, which would make it four straight meetings in which the central bank has left rates unchanged. The benchmark federal funds rate has been at a target range of 4.25% to 4.5% since the Fed’s last interest rate cut in December.
Central bank policymakers kept interest rates at that level due to uncertainty about the impact of tariffs on both sides of its dual mandate to pursue maximum employment and stable prices with a long-run goal of 2% inflation. Inflation has fallen from the 40-year highs the U.S. economy experienced in 2022, but it remains above the Fed’s target.
President Donald Trump and Vice President JD Vance have ratcheted up their criticism of the Fed’s reluctance to cut interest rates, ridiculing Federal Reserve Chair Jerome Powell as “Mr. Too Late” in their push to influence the central bank’s monetary policy decision-making.
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After a stronger-than-expected May jobs report was released earlier this month, Trump said the Fed’s Powell should cut interest rates by a full percentage point to provide “rocket fuel” for economic growth.
“‘Too Late’ at the Fed is a disaster!” Trump wrote in a post on Truth Social. “Europe has had 10 rate cuts, we have had none. Despite him, our Country is doing great. Go for a full point, Rocket Fuel!”
Trump repeated his call for a full percentage point cut last Wednesday after inflation data showed the consumer price index (CPI) rose less than expected.
“CPI JUST OUT. GREAT NUMBERS! FED SHOULD LOWER ONE FULL POINT. WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE. SO IMPORTANT!!!” Trump wrote in a post on Truth Social.
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Vance echoed that sentiment in a post on X last Wednesday when he posted, “The president has been saying this for a while, but it’s even more clear: the refusal by the Fed to cut rates is monetary malpractice.”
Powell has said repeatedly the Fed is not in a hurry to cut rates and is monitoring risks to both sides of its dual mandate, such as resurgent inflation or a deterioration in the labor market.
The Trump administration’s tariff policies, which have been partially delayed in some instances but have also raised tariff rates significantly in others, have injected additional uncertainty into the economy with the potential for higher consumer prices in the months ahead.
“We’re going to need to see how this evolves,” he said at a press conference following the Fed’s meeting in May. “There are cases in which it would be appropriate for us to cut rates this year. There are cases in which it wouldn’t, and we just don’t know. Until we know more about how this is going to settle out and what the economic implications are for employment and for inflation, I couldn’t confidently say that I know what the appropriate path will be.”
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He has also emphasized that the central bank’s group responsible for setting monetary policy, the Federal Open Market Committee, is not going to base its decisions on politicians’ lobbying.
At a press conference after the Fed’s decision to leave interest rates unchanged in January, the chairman was asked about comments Trump made at the World Economic Forum suggesting he would “demand” that rates be lowered. Powell replied that he’s “not going to have any response or comment whatsoever on what the president said. It’s not appropriate for me to do so.”
Markets overwhelmingly expect the Fed to leave rates unchanged on Wednesday, with the CME FedWatch tool showing a 98.7% probability of the target rate staying at 4.25% to 4.5% as of last Thursday. The Fed’s July meeting is viewed as having more potential for a rate cut, with a 23.4% probability of a cut as opposed to a 76.4% chance of rates holding steady at the current range.
The Fed’s meeting in September is viewed as the likeliest occasion for a rate cut, as traders see a 58.7% chance the target rate will be lowered 25 basis points to a range of 4% to 4.25% after that meeting, CME FedWatch’s tool showed.
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