US Fed's decision comes with increasingly loud calls from President Trump to cut rates
The United States Federal Reserve has elected to hold its benchmark interest rate steady at between 4.25 and 4.5 per cent, a rate it has maintained since the end of 2024.
"Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated," a press release accompanying the decision reads.
The decision comes amid a wide array of conflicting economic and political factors. Earlier on Wednesday, GDP numbers for Q2 were revealed showing that the US grew at a surprisingly high rate of three per cent, with consumer spending rebounding and a singificant decline in imports. June CPI data showed a marked uptick in inflation, with a 0.3 increase on the month roughly in line with expectations. The US jobs market has begun to cool somewhat, with the total number of job openings falling in June.
It is notable that the decision to hold rates steady was not unanimous. Fed Governors Bowman and Waller preferred to lower the target range by 25 basis points, in line with past remarks both had made before this meeting.
Perhaps the most notable development has been the increasingly loud calls for a cut coming directly from the White House. President Donald Trump has exhorted Fed Chair Jerome Powell to cut interest rates immediately. More recently, the President began criticizing cost overruns in a Fed office renovation project as possible grounds to fire Powell and replace him with a Fed Chair more amenable to interest rate cuts.
Analysts have speculated that Trump's agressive rhetoric may only serve to reinforce Powell's unwilligness to cut, with the implication that the independent body is yielding to political pressure rather than focusing on their dual mandate of inflation and employment. Powell has regularly cited the ongoing uncertainty around US trade policy and its likely impact on inflation as a reason to maintain interest rates at their current levels until greater clarity emerges.
