The U.S. Federal Reserve announced Wednesday that it was not cutting a key interest rate, deciding to “maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent.”
“Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated,” the Fed said in its announcement.
The Federal Reserve’s Big Interest Rate Pause, Explained
It was the first Fed meeting of the Trump presidency and the first Fed meeting without a cut since July.
Fed Chairman Jerome Powell held a press conference after the announcement and, per NBC News, he confirmed that he had not spoken to President Trump since Trump returned to office.
“I’m not going to have any response or comment whatsoever on what the president said,” Powell, who was appointed Fed Chairman in 2018, during Trump’s first term, said at the press conference. “It’s not appropriate for me to do so. The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals and really keeping our heads down and doing our work.”
Donald Trump Reacts to the Fed’s Move
Trump, who has questioned the traditional independence of the Federal Reserve, said in a virtual speech to the World Economic Forum last week that he would “demand that interest rates drop immediately.”
The president also reacted, on Truth Social, to the lack of a rate cut on Wednesday.
“Because Jay Powell and the Fed failed to stop the problem they created with Inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing, but I will do much more than stopping Inflation, I will make our Country financially, and otherwise, powerful again!,” Trump said.
“The Fed has done a terrible job on Bank Regulation. Treasury is going to lead the effort to cut unnecessary Regulation, and will unleash lending for all American people and businesses. If the Fed had spent less time on DEI, gender ideology, “green” energy, and fake climate change, Inflation would never have been a problem. Instead, we suffered from the worst Inflation in the History of our Country!”
A Question of Independence
Fed Chairmen are appointed by presidents to four-year terms. Presidents usually must choose, once that term is ending, whether to re-appoint the chairman.
Powell has said in the past that he would not resign, nor would he step aside if Trump attempted to remove him. Trump did say, back in early December, that he did not plan to remove Powell.
Following Trump’s comments to the World Economic Forum, CBS News talked to experts who urged that Trump maintain the Fed’s traditional independence.
“We know monetary policy needs to be enacted with a democratic mandate underpinning it, with a day-to-day remove from politics,” Brett House, an economics professor at Columbia Business School, told CBS. “Interest rates may need to be raised but it may be inconvenient for political interests, and [the central bank] may need to move quickly to lower rates.”
President-elect of the United States Donald Trump speaking with attendees at the 2024 AmericaFest at the Phoenix Convention Center in Phoenix, Arizona.
Rates were raised and then later lowered during the high-inflation Biden years, and Powell has drawn praise from economists for timing the moves well.
“The Fed has done really well — they have raised the rates enough to try to slowly squeeze inflation out of the market,” Erasmus Kersting, a professor of economics at Villanova University, told CBS, adding that the Powell-led Fed has “done all that while avoiding a recession — that is a delicate needle to thread.”
About the Author: Stephen Silver
Stephen Silver is an award-winning journalist, essayist and film critic, and contributor to the Philadelphia Inquirer, the Jewish Telegraphic Agency, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. For over a decade, Stephen has authored thousands of articles that focus on politics, technology, and the economy. Follow him on X (formerly Twitter) at @StephenSilver, and subscribe to his Substack newsletter.
