Federal Reserve holds interest rates, defying Trump's demand to lower them
The US Federal Reserve kept interest rates on hold, but signaled it might make two cuts this year, as Donald Trump continues to break with precedent and demand lower rates.
Policymakers at the American central bank lifted their projections for inflation this year, as the US president stands by his controversial tariff plans, and downgraded their estimates for economic growth.
Uncertainty has faded, they said, but remains significant.
Hours before the central bank announced its latest decision, Trump called its chair, Jerome Powell, 'stupid' and accurately predicted rates would be maintained on Wednesday.
'He's a political guy who's not a smart person, but he's costing the country a fortune,' Trump , whose attacks have raised questions over the Fed's independence, claimed of Powell. The central bank has repeatedly stressed it makes decisions based on economic data, rather than political interventions.
Policymakers at the central bank expect inflation to increase by an average rate of 3% this year, according to projections released alongside its latest decision on Wednesday, up from a previous estimate of 2.7% – and highlighting how far the US remains from the Fed's inflation target of 2%.
As Trump's aggressive tariffs agenda continues to disrupt the global economy, and raises concern about price growth, officials at the Fed have repeatedly warned of an uncertain road ahead.
They expect the US economy to grow by an average rate of 1.4% this year, down from March's 1.7% estimate, which itself was a significant downgrade from the previous 2.1% estimate in December.
As the Fed confirmed on Wednesday that a targeted federal funds rate had been held at a range of 4.25% to 4.5% following its rate-setting open market committee's latest two-day meeting, it said: 'Uncertainty about the economic outlook has diminished but remains elevated.'
A closely watched 'dot plot', which shows policymakers' predictions for the trajectory of rates, indicated that most expect to cut rates at least twice in 2025, with further cuts in future years.
'Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace,' the committee said in a statement. 'The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.'
The central bank has so far defied Trump's attacks on its decisions, holding firm on its independence from the White House. After Powell spoke with the US president last month, the Fed said that he had made clear that its actions 'will depend entirely on incoming economic information and what that means for the outlook'.
Wall Street rose after the announcement on Wednesday. The benchmark S&P 500 was 0.2% higher, while the Dow Jones industrial average also increased 0.2%.
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