Federal Reserve holds a stable interest rate on Wednesday, only a few weeks after President Donald Trump intensified the call for lower loan costs and voiced the desire about the potential of “termination” of Chairman of Fed Jerome Powell.
In recent days, Trump has played his attack back on Powell, saying he will not fire Powell before the end of the central banker term next year. Trump has repeated his displeasure with interest rates, however, urged the central bank to reduce it.
Speaking at a press conference in Washington, DC, on Wednesday, Powell said the economy remained in a “strong form” but warning Trump’s tariff policy could cause higher inflation and economic slowdown.
“If the large increase in the announced tariff is maintained, they tend to produce an increase in inflation and slowing economic growth,” Powell said, Wednesday.
“However, all of these policies are developing, and its influence on the economy remains very uncertain,” Powell added.
When asked about Trump’s call for lower rates, Powell ignored criticism from the President.
“That does not affect our work at all,” Powell said. “We will always consider only economic data, views, risk balance – and only that.”
This step marks the second decision of the Fed in succession to maintain the current interest rate, repeating the approach taken in January. Before that, The Fed had a cut rate at three consecutive meetings.
“For now, it seems that the decision is quite clear for us to wait and see,” Powell said.
The Federal Open Market Committee (FOMC), a policy -making body at The Fed, said on Wednesday that the main economic indicators had improved but warned of increasing economic uncertainty.
“Higher risk of unemployment and higher inflation has increased,” FOMC said in a statement.
Last month, Powell raised the possibility that Trump tariffs could cause what economists were called “stagflation,” which was when inflation rose and the economy slowed down.
If the Fed raises interest rates as a means to protect against inflation that is induced by tariffs under such scenarios, it is at risk of holding loans and slowing down the economy further. On the other hand, if Fed decreases the level to stimulate the economy in dealing with potential slowdown, it threatens to increase expenditure and worsen inflation.
However, Powell refers to a solid economic performance as an excuse to take the patient’s approach as a policy maker waiting for the tariff impact.
“For now, we have a good position to wait for greater clarity,” Powell told hearings at the Chicago Economic Club.
Powell noted the possibility of a shift in economic conditions, saying, “Life moves quite quickly.”
The tariff decision arrived a few days after the new data showed a strong work growth in April.
Although lethargic consumer sentiment and market turmoil, the labor market has provided a bright spot since Trump served. Meanwhile, inflation was cooled in March, the last month available data.
Even so, recession fears increased on Wall Street because Trump’s tariff threatened to reverse global trade. Goldman Sachs earlier this month climbed a recession opportunity from 35% to 45%. JPMorgan set the probability of this year’s recession of 60%.
A government report last week showed that the US economy shrank during the first three months of 2025, many of them occurred when Trump from the tariff proposal triggered uncertainty between business and consumers.
Chairman of Federal Reserve Jerome Powell spoke at the Economic Club of Chicago, April 16, 2025, in Chicago, Illinois.
Kamil Krzaczynski/AFP via Getty Images
The US Gross Domestic Product, or GDP, decreased at an annual level of 0.3% for three months ended in March, according to government data released on Wednesday. This figure marks a sharp decline from the annual growth of 2.4% over the past three months of 2024.
The tariff decision on Wednesday also marked the first adjustment of the loan fee due to the announcement of the “Liberation Day” tariff that Trump watched tightly on April 2, which triggered the largest one-day stock market decline since Pandemi Covid-19.
A few days later, Trump suspended a large tariff from the tariff, sending the market to one of the biggest increases in one day ever. Escalation of Chinese goods tariffs simultaneously maintain an effective rate at the highest level in more than a century, Yale Budget Lab found.
The White House seeks to make a trading agreement with dozens of US trading partners before the 90 -day suspension called the “reciprocal rate” ended in July.
“When we get a better understanding of policy changes, we will have a better meaning of implications for the economy,” Powell said last month.