Federal Reserve expected to stand pat on rates even as Donald Trump demands cuts

Federal Reserve likely to keep interest rates steady amid Trump's push for lower rates, despite economic uncertainty.

The Federal Reserve is nearly certain to keep its key interest rate unchanged at its policy meeting this week, just a few days after President Donald Trump said he would soon demand lower rates.

Fed officials, led by Chair Jerome Powell, have cut their rate for three meetings in a row, to about 4.3%, from a two-decade high of 5.3%. Yet with several recent economic reports showing healthy hiring and some progress on inflation, policymakers have said that the pace of rate cuts will slow this year. Some have suggested that few reductions are needed at all.

While the two-day meeting that ends Wednesday may be uneventful, it nevertheless kicks off what is likely to be a turbulent year for the Fed. Mr. Trump, last Thursday, made clear he expects to comment on interest-rate policy and said, “I know interest rates much better than they do."

At the same time, Fed officials are also navigating a delicate period for the economy: They want to keep borrowing costs high enough to push inflation back to their 2% target, without keeping them too high for too long and plunging the economy into a recession.

The last time he was in the White House, Mr. Trump threatened to fire Powell, whom he appointed in late 2017, but he has more recently backed off such threats. Powell's term as chair ends in May 2026, when Trump can name a replacement.

Until then, Mr. Trump's comments Thursday suggest he expects to regularly second-guess the Fed in public, despite a decades-long tradition among previous presidents of taking a hands-off approach to the central bank. Former president Joe Biden reappointed Powell, rather than replacing him, in a nod to central bank independence from politics.

Vincent Reinhart, chief economist at BNY Investments and a former top economist at the Fed, said Powell won't let Trump's attacks affect his policy decisions.